DMBM210160 - Payment Allocation, Overpayments and Repayments: Self Assessment: Automatic Payment Allocation Rules

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Allocation rules

When a payment is posted to a customer record the payment is automatically allocated or linked to any SA charge(s) that <ul><li class="dash">is overdue, or</li><li class="dash">falls due within the next 45 days</li></ul>Note: The 45 day period is a parameter and can be varied. The SA system allocates payments against charges in the following order<ol type="1" start="1"><li>Charge with the earliest Statutory due date (SDD)

</li><li>Within each SDD, to the charge for the earliest tax year

</li><li>Within each liability period, in charge creation date order (starting with the earliest charge created)

</li></ol>The SDD of the original charge is used to determine the allocation regardless of whether a liability is interest bearing or not and without regard to any later Relevant due date (RDD). If exceptionally a payment is allocated to a charge with a future RDD at the expense of a charge on which interest is accruing, the customer will suffer an interest disadvantage. Where this situation comes to light the allocation is to be corrected; see DMBM210190and DMBM210195.Note: An amendment to a charge does not affect the allocation order. The SDD of the original charge determines which charge is cleared first by a credit.The example below illustrates that it is the SDD of the original charge that determines the order in which credits are allocated.ExampleA return is captured for 1996/97 on 29 December 1997. This establishes a balancing charge (BCD) for 1996/97 of £1,600 and creates payments on account (POA) for 1997/98 of £2,800 each. The SDD for both the BCD and first POA is 31 January 1998. The return is amended (increased) by £600 and notified to the customer on 7 February 1998. The SDD of the increased amount is 9 March 1998. The customer sends a part payment of £2,000 on 15 March 1998. All of the payment is allocated to the BCD (including the increase) even though £400 of the amount cleared has a later SDD than the first POA for 1997/98.<h2>Unallocated payments</h2>If there are no unpaid liabilities, or the charge is not due for more than 45 days, the SA payment is held on the record as an excess credit or an unallocated amount.Note: The 45 day period is a parameter and can be varied.<h2>Change in the allocation</h2>Once a payment has been allocated the allocation is only disturbed if <ul><li class="dash">the associated charge is reduced</li><li class="dash">all or part of the payment is transferred, or</li><li class="dash">the payment is returned </li></ul>Following a reduction in a charge any overpaid amount is re-allocated. Where an overpaid amount cannot be allocated to a charge (see ‘Allocation rules’ above) it is held on the customer record. In some cases, a charge reduction can cause multiple payment re- allocations.If the reduced charge is subsequently increased, any unallocated payment or overpaid amount is allocated against the increase. However, where an amount previously classed as overpaid has already been allocated to a fresh charge that fresh allocation is not disturbed.There is an online function CLERICAL REALLOCATION that can be used to amend a payment allocation on the SA record of an individual or trust.Any other transfer of a payment for example, to another customer’s account, can be done by transferring the payment from SA to OAS with appropriate disposal instructions.For information about changing an allocation see DMBM210190and DMBM210195.