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HMRC internal manual

Inheritance Tax Manual

Assessing: COMPASS: calculations: IOP(WIR) calculation

Where interest relief applies to instalments the calculation is the same as for the ordinary IOP calculation (IHTM31184), except that interest is charged differently to take the interest relief (IHTM30363) into account.

COMPASS should calculate interest as follows:

  • box 1 on the unpaid tax from the due date of the last instalment to the Effective Date (IHTM31187) of the calculation
  • box 2 does not apply
  • box 3 on one tenth of the change in tax from the second due date to the third, two tenths from the third due date to the fourth and so on, up to the latest due date.

The calculation of interest with interest relief is not straightforward and COMPASS often gets this wrong, particularly where the tax charge is apportioned between property on which instalments apply and property on which they don’t.

You should always check the interest charge calculated by COMPASS. If you need to make any adjustments you can do this in the relevant adjustment box.