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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Assessing: calculating interest: repayment supplement on Income Tax and Capital Gains Tax (CGT) repayments

When a repayment of Income Tax or CGT has been delayed, an extra payment (repayment supplement) is sometimes made as compensation to the taxpayer. It may be made under the authority of F(No 2)A92/S47 or ICTA88/S824.

Broadly, a repayment supplement is payable:

  • if the tax repayment amounts to £25 or more, and
  • the repayment is made after the end of the period of twelve months following the year of calculation.

The repayment supplement itself is chargeable to Inheritance Tax to the extent to which a right to it existed at the date of death. You should include the repayment supplement as an asset of the estate if:

  • the tax repayment was already due at the date of death, and
  • a period of twelve months had passed following the year of assessment of the tax repayable.

What you do

Where the taxpayer tells you about a tax repayment but it is not clear whether it includes a repayment supplement, you should usually calculate tax and interest as normal, without making any further enquiries. You should only ask whether the supplement is included where the amount involved is large and the tax on the repayment supplement will clearly be substantial.

If the tax on the repayment supplement involved makes it worthwhile and there was a right to the repayment supplement at the date of death you should:

  • charge tax on that part of the repayment supplement to which the right extended, and
  • give relief against interest (IHTM31515) only in respect of periods not covered by the repayment supplement.

You may need to ask the taxpayer for details of the repayment supplement (if it is not already noted on the file). However, if the repayment supplement is substantial consult your manager before raising the matter with the taxpayer.