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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Assessing: calculating interest: increase in total tax in IOP cases

If there is an increase in the total tax payable in respect of the Instalment Option Property (IOP) (IHTM31012) after two or more instalments have been assessed you should charge interest:

  • on the extra tax due in respect of the instalments already assessed
  • from the due date of the latest instalment to the date of payment (date of calculation)

and

  • on the total amount of additional tax
  • from the day after the original due date to the due date of the latest instalment.

Example

  • 1st instalment of £1,000 due 30 September 2010
  • 2nd instalment of £1,000 due 30 September 2011
  • 3rd instalment of £1,000 due 30 September 2012 (paid)
  • Total IOP tax charge increased from £10,000 to £12,000.

You calculate the additional tax on the 3rd instalment on 30 December 2012 and charge interest

  • On tax now payable (£600) from 1 October 2012 to 30 December 2012
  • On the total additional tax unpaid (£2,000) from 1 October 2010 to 30 September 2012 (box 3 interest on COMPASS (IHTM31101).

Increase included in the calculation for due instalment

If you are raising a calculation where:

  • two or more instalments have already been calculated,
  • there has been an increase in tax since the last calculation, and you now need to calculate the next instalment as it is now due/overdue,

you must remember to calculate the interest on the unpaid tax from the date of the last assessed instalment to the instalment that is now due.

Example

  • 1st instalment of £1,000 due 30 September 2010
  • 2nd instalment of £1,000 due 30 September 2011(raised and paid)
  • Total IOP tax charge increased from £10,000 to £12,000.
  • 3rd instalment, now £1,200 due 30 September 2012 (not yet calculated),

You calculate the 3rd instalment, including the additional tax on 10 October 2012 and charge interest:

  • On tax now payable (£1,600) from 1 October 2012 to 10 October 2012 (box 1 interest on COMPASS)
  • On unpaid tax (£10,000) from 1 October 2011 to 31 September 2011 (box 2 interest)
  • On the total additional tax unpaid (£2,000) for the period before the last instalment, from 1 October 00 to 30 September 2011 (box 3 interest)