IHTM31682 - Assessing: offset repayments: setting off money at the same entry
Where you want to use a repayment against tax that is due within the same entry you should treat the repayment as if it was money we held on deposit, from the date we first received it. This will have the effect of giving the taxpayer or agent full credit for the amount of money they overpaid. The credit is given by stopping interest on the amount we are setting-off at the rate we charge on tax due.
If there is tax still to be paid by instalments at the other assessment group
There is one situation where the interest situation could become complicated when you set off money within the entry. This is where you are repaying money at one assessment group and there are still future instalments to be collected at the corresponding IOP assessment group. In this situation you should not set off the amount to be repaid. Instead use the form Sect 6 to ask for the money to be placed on deposit at the file. The date of deposit will be the original effective date of payment (EDP) when the money was received. Whilst this adds an extra step to the process it makes it much easier to apply the money against tax and interest in the correct way.
If there is no balance to be repaid to the taxpayer or agent
If the amount repayable to be off-set against tax due is less than or the same as the amount due on the other calculation(s) you do not need to complete a form Sect 6. Instead you should:
- Prepare and raise the repayment calculation as usual.
- On the calculation where tax is payable, choose the ‘Money’ button and enter a ‘deposit’ based on the amount to be repaid.
- The deposit number will be the assessment group and number of the repayment calculation. Write the word ‘FROM ’in front of it. For example ‘FROM ANIOP1/2’. Abbreviate FROM to FRM if the calculation number is in double figures.
- The date to use for the ‘date received’ and ‘amount’ of the ‘deposit’ depends on the value of the last payment received at the entry.
- If the last payment was for more than the repayment being applied, you should use the last payment date at that entry and full amount of the repayment.
- If the last payment was for less than the repayment, you should use the date and amount of the payment and then create a further ‘deposit’. This deposit should use the same deposit reference, but the date and amount of the payment from the second to last payment received at the entry and so on, until the whole amount of the repayment has been applied.
Example
Joan died on 18 July 2010. Tax paid on delivery of her account on 20 March 2011 was:
- £60,000 on NIOP 1/1
- £3,000 on IOP 1/1.
Further tax and interest was paid on 6 June 2011:
- £6,000 on NIOP 1/2, and
- £20,000 on IOP 1/2.
The current calculations now show:
- a repayment of £36,000 on NIOP 1/3,
- with £50,000 tax to collect at IOP 1/3.
The ‘deposits’ shown on the assessment at A IOP 1/3 for £50,000 tax should be:
- Deposit number FROM ANIOP1/3
- Date received 6 June 2011
- Amount £26,000
And
- Deposit number FROM ANIOP1/3
- Date received 20 March 2011
- Amount £10,000
If there is a balance to be repaid to the taxpayer or agent
If the amount to be repaid is more than the amount of tax due you will need to do the following:
- Prepare and raise the repayment calculation as usual.
- On the calculation where tax is payable, choose the ‘Money’ button and enter a ‘deposit’ based on the full amount to be repaid.
- The deposit number will be the assessment group and number of the repayment calculation. Write the word ‘FROM ’in front of it. For example ‘FROM ANIOP1/2’. Abbreviate FROM to FRM if the calculation number is in double figures.
- The date to use for the ‘date received’ and ‘amount’ of the ‘deposit’ depends on the value of the last payment received at the entry.
- If the last payment was for more than the repayment being applied, you should use the last payment date at that entry and full amount of the repayment.
- If the last payment was for less than the repayment, you should use the date and amount of the payment and then create a further ‘deposit’. This deposit should use the same deposit reference, but the date and amount of the payment from the second to last payment received at the entry and so on, until the whole amount of the repayment has been applied.
- COMPASS will calculate the interest due correctly. Although the amount of the deposit shown in the money box will be the full amount of the repayment the printed assessment will only show the amount of the repayment needed to bring the calculation to nil.
- Prepare a Sect 6 to repay the balance. You should show the amount you have set off and where it has been used on the Sect 6, in the internal set offs box.
- You will need to calculate the interest supplement on the balance that is left over to be repaid to the taxpayer or agent. Deduct the amount of the set off from the total amount to be repaid and calculate the supplementary interest on this figure. The interest will be due on the amount overpaid from the date(s) we received it to the date the repayment will be issued. This is usually five days from the date you prepare the calculation.
- Send the calculations and repayment to the reviewing officer (IHTM31647) in the normal way.