IHTM31550 - Assessing: calculating interest: manual adjustments to COMPASS interest calculations
There are a number of occasions where you may need to check the way COMPASS has calculated interest and manually adjust it. The following scenarios apply to without interest relief calculations that remain taxpaying:
Scenario 1
If supplementary interest is charged in the adjustment box COMPASS may not always repay it.
You should check whether any supplementary interest has been charged. If it has you should calculate the amount to be repaid
Scenario 2
When interest previously charged at Box 2 has been reduced, as money was held on deposit, COMPASS will repay too much interest. It does this because it can not recognise that the deposit was previously taken into account.
You should check whether a deposit restricted interest charged on previous calculations. If so, you will need to adjust the interest to be repaid accordingly.
Scenario 3
Repayments on Instalments. Where the tax repayable is more than the tax actually paid at the last calculation the formula (P-R) will give the wrong answer.
For example, £10,000 tax is due on a property. The first instalment is for £1,000 tax. The second is also for £1,000 tax and interest is charged on the unpaid tax, £9,000. At the moment, if the total tax were to be reduced to somewhere between £1 and £1,000, COMPASS would repay interest as if it had been charged on £10,000 at Box 2 Column A and d not £9,000.
Interest must be calculated from first principles. If tax is still due the interest to be repaid will be less than the total interest charged to date.
Scenario 4
Where:
- all the tax is paid on the instalment option property, after two or more instalments have been paid, and
- then there is a decrease in the tax due.
COMPASS will 바카라 사이트˜forget바카라 사이트™ that interest was charged on the unpaid tax on the second instalment.
Check that all the values and dates for which interest has been calculated tie in with the interest to be repaid. Check all instalment option calculations, not just the last one. If the values do not tie in, make the necessary adjustments. In this case you will need to increase the interest to be repaid. The interest should be calculated on the total tax that was due, less the total tax that is now due, for the periods where interest was charged at box 2 column A.
Scenario 5
Because COMPASS cannot recognise individual assets, it gets 바카라 사이트˜confused바카라 사이트™ when assets move from sold to unsold. As an example:
An estate contains two properties - 바카라 사이트˜Treetops바카라 사이트™ and 바카라 사이트˜The Grange바카라 사이트™ All the tax is paid on 바카라 사이트˜Treetops바카라 사이트™ before six months from the date of death, so no interest is charged on the tax due on the property. We issue calculations for the tax on 바카라 사이트˜The Grange바카라 사이트™ as instalment option property, and two instalments are paid. So interest is charged on the unpaid tax on 바카라 사이트˜The Grange바카라 사이트™ when we collect tax on the second instalment. 바카라 사이트˜The Grange바카라 사이트™ is then sold so we collect all the tax due on it. Following this there is a decrease in the total IHT due. We should only repay interest on 바카라 사이트˜The Grange바카라 사이트™ as this is the only property that we charged interest on. But COMPASS will not understand this and repay as if interest had been charged on바카라 사이트™ Treetops, as well as 바카라 사이트˜The Grange바카라 사이트™.
Check that all the values and dates for which interest has been calculated tie in with the interest to be repaid. Check all instalment option calculations, not just the last one. If the values do not tie in, make the necessary adjustments. In this case you need to decrease the interest to be repaid. To do this you need to work out the revised total tax due on 바카라 사이트˜The Grange바카라 사이트™ Take this from the old total for the tax due on 바카라 사이트˜The Grange바카라 사이트™. Calculate interest on the difference for the periods interest was charged at Box 2 Column A on 바카라 사이트˜The Grange바카라 사이트™.
Scenario 6
You should remember that COMPASS is not generally robust at Box 3 in either column after a calculation has been issued that has an interest calculation in box 3.
Some of the general problems (IHTM31195) may also affect the interest charge.