IHTM29092 - Interest yield: more complex cases

Other cases are more complicated. If you are assessing amendments that are not adjustments to yield at the same time as those that are, you will not be able to take the interest figure from the COMPASS calculation. This is because only a proportion of the interest charged will relate to the yield. This will be the case if

• the calculation includes interest on the tax due on delivery of the account as well as interest due on adjustments to yield
• the calculation includes adjustments that are not adjustments to yield, as well as those that are
• the calculation includes an asset or assets that have decreased in value as well as one or more on which we are claiming intervention yield
• the tax is being paid by instalments.

In these cases, you will need to use the additional interest calculator to work out the interest due as described below. You can find the additional interest calculator at K:\VB Apps\In House Applications. Click on the icon to open the calculator. Enter the total yield as the figure for tax on the additional interest calculator. The start and end dates for interest are those used in the corresponding COMPASS calculation. The calculator will give you the figure for the interest due on the yield .

Example 2

The date of death was 8 May 2005.

All of the tax due on the NIOP on delivery of the account has been paid and the first instalment of tax has been paid. The solicitors want to continue to pay the tax by instalments.

The DV reports an increase of £93,750 in the value of the realty. An assessment is raised on 12/09/2006.

The adjustment to yield is + £37,500.

Interest is charged on £37,500 from 1/12/2005 to 12/09/2006

The interest yield is £886.27.

If the calculation includes an asset or assets that have decreased in value, alongside positive adjustments to yield, you will have to deduct the amount of the decrease in tax from the amount of yield, before calculating the interest due.

Example 3

The DV reports an increase of £148,500. The yield on this adjustment is £59,400.

At the same time the solicitors report a decrease in a bank account of £90,000. The reduction in tax on this is £36,000.

You must deduct £36,000 from £59,400

Interest yield is calculated on £23,400.

If there is money on deposit you should deduct this from the yield before you enter the figure in the additional interest calculator (see example 4). If the calculation includes both adjustments to yield and other adjustments, apply the deposit against the tax on the other adjustments first.

Example 4

In the above example if the solicitors had put £20,000 on deposit on 10/01/2006 then we would need to calculate interest on £37,500  from 1/12/05 to 10/01/06 and £17,500 from 11/01/06 to 12/09/06 = £480.80 interest yield.

Where tax is being paid by instalments the interest yield calculated may be higher than the amount that is actually charged on the assessments raised at that time. This is because it will include a proportion of the interest yield which will be assessed with each of the future instalments (example 2 shows a calculation where tax is paid by instalments).