Surcharges & allocation of payments

Surcharges & allocation of payments

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I have a client who has had an amendment to an earlier years tax liability and HMRC are imposing surcharges and interest on the surcharges.

However, client has been making payments on account each year and if HMRC re-allocate payments, the surcharges will be massively reduced.  HMRC are unsure that I can request payments to be re-allocated to the benefit of the client but I thought this was standard practice.

Does anyone have any comments or pointers to relevant legislation?

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By MarionMorrison
05th Jul 2010 16:20

You can in theory

The Revenue's computer has a perfectly logical approach to these.  It goes for tax/NI liabilities, oldest first, then surcharges (oldest first) and then onto interest on these, oldest first.

But you can choose to write, pre-allocating the fate of the payments being sent.  Make sure you keep copies of any letters requesting this, because the computer will like-as-not ignore the request.  You have one opportunity to amend the computer's choice of allocation which is within 30 days of being sent a statement that shows where a payment has been allocated.  Miss that and you're stuffed.

When we've done this before and been penalised, we've ended up appealing against the Surcharges issued, they haven't always bothered re-allocating the payments - they just removed the Surcharge and left the payments where they were.

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By rockallj
05th Jul 2010 20:39

You can

but you'll have to request it. They won't allocate directly against liabilities unless you specify this.

They will always just offset against the oldest liability regrdless of its nature.

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