How does HMRC allocate tax payments

Why does HMRC not pay off oldest tax first

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I have a client who still had some 2022 tax owing this January so in Feb had 2022,2023 and payments on account for 2024 owing.  Client has paid enough to clear 2022 and some 2023 but HMRC has allocated across all 3 tax years so there is still tax owing for each year.  I read that you can ask for payments to be specifically allocated to a tax year at the time of making the payment but, in view of post delays & phoning problems nowadays, how would you do that with income tax?

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By B Roberts
23rd Apr 2024 11:35

It is also fun when you pay a liability of say, £84,352.37 (which is quite a specific amount) and include the correct references etc. and they are still unable to allocate the payment - or even post the payment as cash on account on another type of tax.

I now only use the "pay now" button on the Gateway to hopefully avoid mis-allocations.

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By TessaW
23rd Apr 2024 11:45

Thanks B Roberts - do I take it that there would be an option to "pay now" against each of the tax year's liabilities?
I was thinking that perhaps you phone debt management (got through Ok on that line) before making payment & maybe they can arrange the allocation.

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Replying to TessaW:
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By B Roberts
23rd Apr 2024 11:52

TessaW wrote:

Thanks B Roberts - do I take it that there would be an option to "pay now" against each of the tax year's liabilities?
I was thinking that perhaps you phone debt management (got through Ok on that line) before making payment & maybe they can arrange the allocation.

There should be- then you can make a number of specific payments.

If you look on the Gateway and select "Annual Statements and payment record" you should be able to select the year(s) and drill down from there.

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By K81
23rd Apr 2024 11:47

HMRC are suppose dt cover oldest tax owed first to stop/reduce interest charges.
is the amount owing each year tax & not interest?
if you can get through to them ask them to reallocate payments .

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By rmillaree
23rd Apr 2024 12:01

if the only older debt is interest - then hmrc will pay down newer debt first as there is no intererst charged on late payment interest. Note i am preuming tax is paid late here. this can be an issued if someone wants an sa302 showing all taxes as paid !

So if old debt only interest then hmrc are acting in your interests - if its not contact hmrc and ask them to reallocate payments to old debt first. Its not that common but can happen - particularly if payments on account are reduced paid and matched and then increased at a later date.

Note there could be edge cases that may be more complicated

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By booksy
24th Apr 2024 13:41

I've had two clients who've had their repayments reallocated to previous years leaving a strange nil balance and then a year later the repayments are moved to future year and now showing repayment due but presumably only due in 24/25. And another client whose cheque repayment due has just vanished off the face of the earth due to an "Allocation from 8 April" leaving nothing to be paid. Of course there is no way to contact HMRC. I'd love to know how they balance their books.

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By simong16
27th Apr 2024 11:35

HMRC is no longer fit for purpose. I have a company who have overpaid HMRC but have still been charged interest for late payment. I struggle to understand the interest charge if HMRC is already holding cash paid on ac by the "customer". Trying to speak to them is well nye impossible and resorting to physical correspondence takes forever. The client account does not show what the balance the company is owed or has paid only how HMRC have allocated payments. There seems to be no basic accounting knowledge at HMRC.

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By Paul Crowley
27th Apr 2024 13:53

Tax
What tax would that be?

It works correctly on self-assessment personal tax.
Corp tax are all separate liabilities, so client need to tell them.
PAYE is carp. Never makes any sense unless client pays the correct amount each payday with the correct references, and there is no CIS, either direction.

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