COM80080 - Interest: how interest is calculated: clerical calculation of credit / debit interest
General
COTAX does not automatically calculate or charge credit interest (Word 34KB) or debit interest (Word 31KB) where
Or
- There is a ‘Date Struck Off’ on record and this date has passed
Reallocations of payments using functions REAO or REOD (Reallocation Out Of COTAX)
COTAX will not automatically calculate / recalculated credit and debit interest where
- Money is reallocated from a CTSA AP to OAS (Word 28KB) using either functions REAO or REOD (Reallocate Out Of COTAX)
Where a payment is moved from COTAX to OAS COTAX is unable to calculate credit / debit interest correctly since it is unable to identify where the monies final destination will be. Because of this it is unable to apply common period (Word 29KB) rules which affect the charging of interest.
Where you reallocate out of COTAX you will receive a warning that your action will affect the credit / debit interest and that you must set the CDII (Credit / Debit Interest Indicator) and have the interest position reviewed clerically.
Credit / debit interest before the normal due date
You can calculate credit /debit interest before the normal due date where the company make a request for it to be paid so long as the following conditions have been met
- A tax charge has been recorded
And
- The tax charge has been satisfied in full
Where the company is noted as being an instalment payer and there is no outstanding overpayment on the accounting period, you can calculate the full amount of the credit / debit interest and post this on AP. Where an overpayment has not been repaid or reallocated, contact the CT Processing Office and ask them to deal with it first so that you can include any interest due on the overpayment in your calculations.
Where the company is not noted as being an instalment payer, advise the company that you cannot calculate the full amount of credit interest due until the normal due date (NDD) because of potential interest rate changes.
Calculating and Raising a Manual Interest Charge
The Banking Operations Office and Debt Management Offices use function RMIC (Raise Manual Interest Charge) to raise or amend a Credit / Debit interest charge
- Using the payment details
And
- For a quarterly instalment AP the Quarterly instalment payment (Word 42KB) and instalment due date (Word 42KB)
And
- For a non-QP case the normal due date
Before you reduce an interest charge, you must get authority on the appropriate form
- AZ44, 987, IRU1 in Banking Operations
And
- AZ63 in Debt Management Offices
The form will tell you why the original calculation was wrong.
Note: You do not need this authority if you work in a Debt Management Office and are responsible for lodging the HMRC claim in Insolvency cases.
Function RMIC (Raise Manual Interest Charge) is used to raise or amend an interest charge clerically
- In the Banking Operations Office where the CDII is set to 'Y' and the Pursuit Status is
- LA (Word 28KB), LA-ENF (Word 27KB) or PLA (Word 28KB) and COTAX is unable to calculate interest correctly on a carry-back or where S458 CTA 2010 (formerly S419(4) ICTA 1988) relief has been granted
- In Debt Management Offices where the CDII is set to 'Y' and the Pursuit Status is LA, LA ENF or PLA
Note: Function RMIC is the only interest function that updates the company’s COTAX record.
Function CINT (Compute Interest) is an interest calculator that provides a computation of interest for credit / debit interest. The interest computation is based on the notional dates and amounts entered on to the screen.
You can use the calculator to calculate interest for either quarterly instalment payment (QIP) cases or non-QIP cases. For a QIP case you will need to indicate that the accounting period (AP) is a QIP AP and then enter the details of the case. The calculator will calculate the due dates and instalments amounts for each quarter along with the credit / debit interest due. For a non- QIP cases you will need to indicate that the AP is a non-QIP AP and again enter details of the case and the calculator will calculate the credit interest due. You do not need to enter a company reference and details of the computation do not update the company record.
If you receive an objection to the interest charge, see section ‘Interest Objections and Amendments’ (COM82000) in this business area.
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.
