Interaction of time to pay and self assesment surcharges

Interaction of time to pay and self assesment...

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Before I fire one off to HMRC, I would just like to check with fellow professionals my understanding of the interaction of time to pay arrangements and surcharges under self assessment.

My understanding is that if you put a time to pay arrangement in place prior to the relevant surcharge date (28 Feb/31 July) you can effectively avoid the surcharge (provided of course the taxpayer sticks to the terms of the time to pay arrangement).

I have a client who agreed a time to pay arrangement with BPSS during July 2010 relating to his unpaid 2008/09 self assessment liabilities. I am surprised that he has now received a surcharge notice re his failure to pay by 31 July 2010. (Although the first surcharge he will have to take on the chin!). 

I have been told by two different contacts at HMRC (although they didn't sound too confident!) that the surcharge has been correctly raised, is added to his account now, but would be cancelled in future if all terms of the time to pay are complied with - in this particular case about 8 months from now.    

Is it right what I am being told? Given that the time to pay arrangements are not due to complete for another 8 months and outside of the usual appeal window for a surcharge notice, I'm a bit nervous of taking their word for it and waiting for the surcharge to be cancelled.

Everything I have read on the HMRC website suggests to me that no surcharge should be imposed until the client breaches the time to pay arrangement.

Any comments from similar experiences would be appreciated. Also technical references.  

Many thanks, regards

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By HeavyMetalMike
25th Aug 2010 19:52

Surcharge should disappear if the agreed settlements are made on

My experience is that as long as the client continues to pay the agreed instalments on time then the surcharge will be creditted once the year is paid in full.

I did appeal against one surcharge and was got the above in writing. No legislation reference mind you.

I also got this over the phone too. Something to do with their "legal obligation" to impose the surcharge if not paid by 28 Feb which I accept. Got a few months to go on the instalments to clear the 08/09 so fingers crossed!!

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