DMBM404020 - Interest: handling interest objections and enquiries: common types of objection

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This list is intended to give you an overview of some of the most common interest objections. Not every scenario is covered.

Sympathy

We can only give up interest where HMRC mistake or unreasonable delay has caused the build up of the interest. If, for example, a customer's illness resulted in late payment of tax, there will be no grounds to give up interest. Unlike late filing and late payment penalties, reasonable excuse is not a consideration when dealing with interest objections.

Missing or delayed payment or tax return

We can't be held responsible for payments or returns that get held up or go missing in the post. We won't normally give up interest unless there is evidence to show that we actually got the item, but later lost it within one of our offices. If you find evidence to support the customer's version of events, send us the papers to consider. If there is no evidence, you should uphold the interest and explain that we can't be held responsible for items lost in transit.

Misleading information

Customers may claim that someone in the Department gave them incorrect verbal or written advice that led them to pay tax late, or believe that they would not have to pay interest. If this happens, check for evidence to prove or disprove the allegations. Submit any cases with evidence of mislead to us to consider. If there is no evidence, look at whether the customer's version of events is reasonable. Has their claim on mislead been consistent all along or is there discrepancies in the story? Have we misled them or did they simply misunderstand what we said?

Due Date or Effective Date of Payment (EDP)

These should not be changed just to remove an interest charge.

The IRU can't change a due date or effective date of payment for you. You should check the date used is in line with your instructions and amend any wrong ones. Only where your own processes don't permit you to update this information, should you submit the case to us to consider.

Repayment in error

Not all of the repayments we give our customers are correct. If a customer banks an incorrect payable order and has to give us a replacement payment at a later date to put things right, we will charge interest up to the date of the second payment.

If you get this type of interest objection, you should check why we made the repayment in the first place. You should uphold the interest if there is no HMRC mistake, if, for example, it was the customer's mistake on their tax return that led to the repayment. But if our mistake caused the repayment, it may be appropriate to give up some interest, so you should submit the papers to us.

(If a customer contacts you about a payable order that he thinks is wrong, you should check very carefully and if you have doubts about it, ask him to return it to you along with an explanation, so that you can cancel the payable order. If they were to bank the payment and have to pay it back at a later date, we would automatically charge interest up to the date of the later payment, which may not be appropriate). See also SA over-repayments.

New records

You should uphold interest where the objection is based on a claim that the customer was waiting for a reference number for either a new business or employer scheme, before making a tax payment. The customer would have known there was tax to pay and could have sent a payment along with a letter of explanation, in the absence of a reference. But see the section on mislead, above, if someone claims we told them to delay paying.

SA over-repayments

Examples are where a Balancing Charge Credit (BCC) has been repaid but a later amendment reduces the BCC. For these interest objections, you should make sure the process in SAM has been followed correctly. The Processing Office who deals with work list W044 is responsible for deciding whether or not it is right to charge interest on late payment, and for fixing any record where interest has been charged inappropriately.

In cases where the Processing Office are satisfied that interest has been correctly charged, you should uphold the interest and submit to us only if your customer is unhappy with your reply.

SA coding

A customer might have an unexpected SA tax bill because a tax code was wrong and didn't deduct enough tax during the tax year. It is irrelevant who was to blame for the wrong code. We can't normally give up interest, as it was the late payment of SA that caused the interest, not the PAYE under-deduction that happened before the SA tax became due.

This also applies where a claim to reduce SA Payments on Account (POAs) turns out to be excessive because not enough tax was paid through PAYE. It is the customer's responsibility to closely monitor their tax position throughout the year and adjust POAs to a more realistic level if appropriate.

SA claim to reduce

We don't usually give up interest if someone makes a valid, but excessive claim to reduce payments on account. Customers are responsible for making sure their tax affairs are in order, revising payments on account and paying what they owe at the correct time.

SA self or HMRC calculation

Customers who decide to work out their own tax should not wait for a calculation or statement from us before paying what they owe. You should uphold interest even if it appears that it was an HMRC mistake or delay that caused them to pay their January payments late. But the POA due on 31 July is different, as we should issue a June statement to remind all SA customers about their July POA. If we don't, we will consider giving up some of the interest.

In HMRC calculation cases, we should also send out a statement for POA 1 and the balancing charge due in January. There are some circumstances, outlined in SAM, where it will be appropriate for local offices to change a due date. If none of these apply, you should send the interest objections to us for consideration.