View Full Version : Interest Calculation on Settlement Tax

9th September 2015, 17:30
After 13 months of waiting (and fretting) I received my Settlement Offer(?) today. I'm keen to get this over with (I've nearly killed myself raising the APN monies) but have a small issue with their interest calculations. Here's why.

An investigation was opened by HMRC after I closed out my second year using the EBT Scheme in the mid noughties (I'd also left the scheme by this point). As a result HMRC withheld my tax refunds while they commenced their investigation into my use of EBT. They effectively held £15k for four years while they gave the issues some thought. Finally the money was refunded to me in 2010 with a whopping £60 interest for the period and I never heard from them again until last year.

Now they've sent me a Settlement Offer charging me £10k in interest for my underpaid tax from the mid noughties until today. They are charging me £3k for the period that they actually had the money (held specifically because of my involvement in this EBT scheme) and which upon its return they paid me £60 in equivalent(ish) interest.

My Accountant has been beyond useless so I'm planning on talking with HMRC directly. Do you think I have an argument to say I shouldn't be charged interest until post 2010 as they actually had the money for a period. They can have there £60 back!

FYI - I had maternity leave and contracted on and off after leaving the EBT scheme which is why I was due tax refunds.

10th September 2015, 10:17
That's crazy! I'm no tax expert but it sounds as though you have reasonable grounds to challenge a portion of the interest calculation.

10th September 2015, 11:53
Unfortunately it is unlikely to work out well. But if you don't try.....

Whilst it is crazy and unfair it is the practice.

The funds of yours that were held by HMRC were totally unrelated to the tax in in dispute. These were, eventually, repaid with the repayment supplement appropriates (this is tiny of course compared to interest charged on late payments).

10th September 2015, 16:16
You need to differentiate between the cash position and the HMRC account.

At the moment HMRC are saying that your account was at NIL prior to the adjustment for additional income. That creates a liability and interest kicks in from the usual due date because the computer says so.

(HMRC officers will admit to not understanding how the computer calculates the position here.)

If you ask them to restate your HMRC account with the alleged additional income, that will reduce the liability for the earlier years (and reduce interest) even though you may have to repay the £60.

Expect a rough ride on this one unfortunately.

It is something Big Group is active with.

23rd September 2015, 15:03
HMRC were not at all interested in my tax rebalance suggestions - but thanks to all posters for your advice and thoughts.