COM80020 - Interest: how interest is calculated: late payment interest calculation by COTAX

COTAX automatically reviews the interest position when a payment (Word 28KB) or charge (Word 28KB) is recorded.

COTAX does not automatically calculate and charge late payment interest (Word 27KB) where

• The Clerical Interest Indicator (CII (Word 32KB)) is set to ‘Y’

• There is a ‘Date Struck Off’ on the record and that date has passed

For further information on interest where there is a struck-off date on record see the guidance in ‘Striking Off’ in the ‘Pursuit’ business area.

Where the CII is not set

COTAX automatically charges late payment interest under Section 87A TMA 1970

• On any tax paid after the normal due date (Word 49KB) for the AP
• Once the tax liability has been paid in full

• A tax charge is present

Note: In CT Pay and File late payment interest was calculated once the due date had passed regardless of whether a tax charge was present or not.

When COTAX calculates late payment interest it applies the following rules. Interest on

• ACT carried-back to a CT Pay and File AP, runs to the normal due date of the AP from which it was carried back
• A non-trading deficit carried-back to an earlier AP, runs to the normal due date of the AP from which it was carried back
• A trading loss carried-back, runs to

• • The normal due date of the receiving AP, when the trade loss is carried back 12 months or less

• • Or
    

• • To the normal due date of the AP from which it was carried back, in all other cases

Where COTAX is unable to calculate interest correctly on a carry-back (Word 32KB), the Inspector will set the CII signal to prevent it creating an incorrect interest charge. For more information see business area ‘Claims / Reliefs’.

Interest is not charged on either

• Penalties or interest itself

• Tax which is stood-over or suspended

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Where the CII is set

COTAX

• Will not automatically calculate and charge Section 87A TMA 1970 interest
• Will not make automatic repayments and reallocations or issue payment applications
• Will not display the total Interest Accrued to Date on

• • Function VPPD (View Payment and Posting Details), View AP Summary screen

• • Or
    

• • Assessment output or Penalty Determinations

For a list of forms relevant to this subject, see COM80011.

For a list of functions to use in particular situations, see COM80012.

For legislation applying to this subject, see COM80013.