CCM10450 - Penalties and Interest: Example of interest on penalties and overpaid credits
At the end of an examination you are inviting a letter of offer from David to cover £3,500 overpaid credits, which are recoverable in-year and also a £750 penalty. Forty-five days have already elapsed since David received the revised decision notice and he has asked for 150 days for payment as he needs to sell some shares to pay the settlement. You and your manager have agreed this is reasonable as the shares cannot be sold any sooner. By the time payment is likely to have been made 195 days will have passed since the date on which he received the revised decision notice and he will have had 150 days to pay the penalty. If the interest rate is 3% the interest charge will be:
| Interest on overpaid tax credits: | £3,500 x 3% x 165/365 | = | £47 |
| Interest on penalties | £750 x 3% x 120/365 | = | £7 |
| Total Interest | = | £54 |
You must include the interest on the form 94NTC on which you calculate the settlement.
If the offer related to an enquiry for 2010/2011 rather than an in-year examination and you are settling it after 30 October 2011, the interest on the overpaid credits will run from 30 October 2011 until the expected date of settlement without discounting the first 30 days.
