VDIM5130 - Calculation of interest: Interest bearing tax payments

This guidance deals with interest matters in respect of prescribed accounting periods starting on or before 31 December 2022. Interest matters with effect from 01 January 2023 are dealt with under Finance Act 2009.

Please see Compliance Handbook page CH140000 onwards to find the new interest rules guidance.

It is important to make sure that any remittances sent by the taxpayer to pay interest bearing tax are appropriated promptly and accurately to the correct assessment, otherwise they may be charged too much interest. Where misappropriation has caused too much interest to be calculated you will need to take steps to get the money re-appropriated as soon as possible. Appropriation policy is the responsibility of Debt Management and Banking (DMB).

Payment of interest bearing tax can also happen following the automatic offset of repayment returns and net over declaration assessments. As the time and amount of payment cannot be forecast accurately, you should take care not to mislead taxpayers by telling them that payment of outstanding tax will happen in this way.

Each week normally on a Monday, a calculation programme is run to confirm which taxpayers should be charged further interest and how much that charge should be. As soon as the interest bearing tax is paid in full the further interest calculation date is set to 99/99/99. As the computer will not recognise this date it will stop calculating further interest on that assessment.

These rules for start and end dates are subject to the rules about time limits, see VDIM2070.