Do tax payments before the date of assessment reduce the SA interest?

Do tax payments before the date of assessment...

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SA return for 2006/07 was submitted (very late) in April 2012 and the tax was due by 31.1.08 with interest running from that date on any unpaid amounts. So far, all correct.
The problem is that HMRC say that any payments made by the client before April 2012 (when the 2006/07 return got onto the statement of account) cannot be set off against the 2006/07 tax bill for interest purposes as the SA tax bill did not exist until April 2012. Is this correct?
The SA statements of account ususally work well in my experience but this just seems wrong. Not sure how to go back and challenge HMRC again on this one.

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By tonycourt
21st Jun 2012 16:56

Rubbish!

Of course they can. What HMRC are saying really is that their system can't cope.

The general rule for any debt, including tax, is that unless the payer stipulates, or the payer and payee agree, a payment must be set against the earliest liability first. This is a princple set in Clayton's case a couple of hundred years ago but still valid to this day - and in fact referred to in HMRC's manuals.

TC 

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By Anthony123
21st Jun 2012 19:22

how come

they have processed a 2006/7 SA return in April 2012? It is out of date. You only have 4 years to file a return. 

is what they have actually done is make an assessment using the discovery provisions to assess the tax due?

you need to be totally clear what has happened.

 

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Replying to Ruddles:
Red Leader
By Red Leader
21st Jun 2012 21:10

@Anthony

2006/07 return issued April 2007. Submitted April 2012. Just a normal case of the taxpayer getting behind with his returns and submitting it late.

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By JCresswellTax
22nd Jun 2012 09:43

Would disagree Red Leader

Anthony is correct.

The Return is out of date, so CANNOT be processed as Self Assessment Tax Return.

This liability has arisen by virtue of a discovery assessment, so I would agree with HMRC that this debt did not arise until the assessment was raised in April 2012.

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By VLH
26th Jun 2012 10:01

HMRC don't seem to know what to do when taxpayers, sorry customers, get into arrears.

They chase them for unpaid tax but when you try to quantify with HMRC the actual amount of tax due they say a SAR cannot be accepted because it is out of date.  When you say that the tax owed is more than the HMRC estimate it seems they can somehow process the out of date tax return, albeit that it will take several weeks.

Still, it keeps our jobs interesting!

 

 

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