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HMRC internal manual

Property Income Manual

HM Revenue & Customs
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Other sums treated like premiums: Payable by instalments

If a premium etc. is payable in instalments, it is normally still taxable as if it had been paid in one lump sum. However, the recipient may claim to pay the tax by instalments if HMRC is satisfied that undue hardship would be suffered otherwise.

The statutory provisions for payment of the tax by instalments are ICTA88/S34 (8) and ITTOIA05/S299. HMRC must be satisfied that otherwise undue hardship would result. The instalments of tax on the amount charged as a premium are to be paid over a period allowed by HMRC. This period cannot extend beyond the earlier of:

  • eight years from the date the payment of tax would have been due, or
  • the time when the last instalment of the premium is payable.

In most cases, HMRC has delegated its power to permit instalment payments to Inspectors. However you have to submit claims to CTIAA (Technical) in two types of cases:

  • if the tax exceeds £300,000, or
  • if your suggestions in a smaller case are not accepted.

Cases where there is an application to pay by instalments should always be seen by an Inspector. When you consider the application, you should consider whether undue hardship would result in the light of the following undertaking, which was given in the House of Commons during the passage of the Finance Bill 1972.

“In considering whether undue hardship would arise, the Revenue would look primarily to the question whether the vendor or disposer could reasonably be expected to pay the tax on the full amount immediately, in the light of the resources made available by the particular transaction involved. Regard would not normally be paid to the other resources of the taxpayer if it could be shown that the instalment arrangement was in the circumstances, and apart from any tax considerations, a normal commercial arrangement and reflected a genuine deferment of the enjoyment of the consideration. The Revenue practice would, of course, be kept under review, in the light of its effect on actual cases arising”. (Parliamentary Debates, House of Commons, 22 June 1972, Official Report, Standing Committee E, Cols. 1358-1359.)

Where payment of tax by instalments is agreed, interest is only payable on the instalments of tax if such instalments are paid late.

If you agree instalment arrangements, you will also have to agree how the instalments will be shown on the tax return and how they will be included in the self-assessment.