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HMRC internal manual

Inheritance Tax Manual

Assessing: deposits: using the deposit

The way in which a deposit is applied affects the way that interest is charged.

Applying the whole deposit in full satisfaction of assessed tax

Here, the deposit is equal to the amount of the calculation. The interest period ends with the effective date of payment (EDP) (IHTM31211) of the deposit.

Applying part of the deposit in full satisfaction of assessed tax.

Here, the deposit is more than the amount of outstanding tax. The interest period ends with the EDP of the deposit.

You will also need to consider whether to repay (IHTM31666) the remainder, once the tax liability has been agreed.

Applying the whole deposit in part satisfaction of assessed tax

Here, the deposit is less than the amount of the calculation.

Apply the deposit against the tax and charge interest up to the EDP of the deposit on that amount.

Charge interest on the amount of tax not covered by the deposit up to the date of the calculation.

Example

£2,000 tax due 30 June 2012

£500 deposit received 15 August 2012

You prepare a calculation on 10 September 2012. Charge interest on

  • £2,000 from 1 July 02 to 15 August 2012, and
  • £1,500 from 16 August 02 to 10 September 2012.