CCM10460 - Penalties and Interest: Calculation of interest - letter of offer

The calculation of the interest will rarely be completely precise because you will be guessing at the date on which the first payment will become due and payable. However, you should use your best judgement to arrive at the interest due. If there is a short delay in obtaining the letter of offer the interest calculation will have been understated but it will not be worth inviting a further letter of offer in most cases. Where the delay is substantial you and your manager will need to consider whether to revise the interest charge and invite a fresh letter of offer.

If interest is to be included in a letter of offer you will need to refer to it in the letter of offer.

If you are inviting a letter of offer, which will be paid by instalments, you need to calculate both forward interest and statutory interest. Forward interest is not statutory interest but is a measure of compensation for HMRC having to wait longer for its money. Forward interest should be calculated in accordance with the guidance in CCM8450. In addition you will have to consider the statutory interest. See CCM10450.

If interest is to be included in a letter of offer you will need to refer to it in the letter of offer. The template for the letter of offer provides these words as optional text.