CCM10440 - Penalties and Interest: Interest on overpaid credits - lump sum letters of offer

If you are inviting a letter of offer this should not normally give the claimant an advantage over someone who does not enter into such a contract.

Examinations

You will only need to consider interest where the overpaid credits are recoverable in-year - see CCM8125. Where, immediately following the end of the appeal period for the revised award notice, you invite a letter of offer for a settlement payable within 30 days you should not normally calculate interest, as the amount involved will be minimal. However, if there is some delay between the date on which the revised decision notice is received by the claimant and the point at which you invite the letter of offer you will need to consider calculating interest.

For example, your notice of revised decision is received on 1 September 2010 showing an overpayment of £3760 is recoverable in-year. The claimant is very slow in handling your correspondence and cancels the settlement meeting twice. It is late December 2010 before you obtain your letter of offer and the settlement will be paid on 1 February 2011. The claimant will have had 153 days to repay the overpaid credits which is 123 days more than we should have allowed. If the interest rate is 3% the interest charge will be:

If the delay is purely as a result of avoidable HMRC delays it would not be fair to expect the claimant to pay interest for this period. (This text has been withheld because of exemptions in the Freedom of Information Act 2000)Interest should only be waived where the delay is unreasonable.

If you are inviting a letter of offer in which you will allow the claimant more than 30 days to pay the settlement, you will need to charge interest. You always disregard the first 30 days from the date on which they would have received the revised decision notice as they are entitled to that period for payment. Interest is chargeable in respect of the penalty from 30 days after the letter of offer is accepted - see example at CCM10450. The interest is charged at the applicable rate for late payment as at the time you calculate your settlement. (This text has been withheld because of exemptions in the Freedom of Information Act 2000)

Enquiries

In most enquiries you will have to consider interest. Interest on overpaid credits is chargeable from 30 days after the first specified date, see CCM11040, until the date on which the credits are repaid. This remains the position even if your enquiry was not concluded until some time after that date or was not opened until after that date. See CCM14330. The exception will be where you open an enquiry shortly after the end of the tax year and you hold the letter of offer by the first specified date. If you allow 30 days for payment the monies will have been repaid by the date from which we charge interest.