How do HMRC apportion payments?

davesnapeuk

I recently received a letter from HMRC stating that I still owed £300 from 2006 tax year.

In October this year I paid £500 to HMRC and out of this they apportioned only £160 to 2006. The remaining £340 they paid towards my 2008 outstanding tax. Consequently I still owe £140 from 2006 and am still incurring charges and interest from 2006 as well as 2008.

Is this legal?

I cannot find anywhere in their website or letters that I have received that tells me how they will apportion any payments. If HMRC were a credit agency they would need to tell me what balances are paid first and whether fees are paid before balances. In my case, they paid off part balance and fees from 2006 and part balance from 2008 rather than closing the 2006 tax year. Do I have to close off all outstanding balances before I ever stop paying fees for 2006?

Is this legal?

I have not been able to talk to anyone in HMRC that can explain their random method for apportioning payments to which outstanding balances. Does anyone similar to the FSA have control of HMRC?

Any advice, money or an idiots guide to understanding HMRC would be much appreciated.

mrkbrrws

They should apportion payments however you tell them to.

Did you specify what taxes you were paying and for what periods?

Rolo_Tomasi

The Revenue computer should allocate payments in a way which is most advantageous to you. I think this means that actual tax for each year is cleared before any interest charges as they do not charge interest on interest.

Mikeyorks

davesnapeuk wrote: »

In October this year I paid £500 to HMRC and out of this they apportioned only £160 to 2006. The remaining £340 they paid towards my 2008 outstanding tax. Consequently I still owe £140 from 2006 and am still incurring charges and interest from 2006 as well as 2008.

I assume we're talking SA throughout? If that's the case SA has a simple single bucket account for each customer (unlike it's predecessor, Schedule D, where each tax year was a separate accounting function) - so you don't need, nor are you able, to specify an allocation. SA payslips / transactions / references don't have a year on them - for this reason.
The payment is allocated, where on account, to the oldest debt first. So - in your case - the system considered that part of 2006 was not due at the time the payment was made.
If you're convinced that part of 2006 is still outstanding and is disadvantaging you - they can 'cordon off' parts of the debt and force a re-allocation to satisfy the old debt. That will, in turn, reduce any interest due in relation to 2006 as the effective date of the October payment will impact. So - you need to ask them to do that, if you're convinced of the facts.

They should be able to tell you how SA allocates payments - it's briefly described here :-

http://www.hmrc.gov.uk/manuals/dmbmanual/DMBM210160.htm

acb

If they are meant to pay the oustanding first how come on my partners liability sheet its still showing from 2005 and 2006 causing more interest and surcharges. Since 2007 he has paid £17700. Yet they are still showng these old amounts Why ?


Acb