SolvedIHTM31532 | Assessing: calculating interest: increase in total IOP(WIR) tax
From HM Revenue & Customs · Inheritance Tax Manual
Where there is interest relief on instalments and there is an increase in tax, you cannot simply charge interest from the first due date on the amount now due. This is because the due date for all the tax is not the same. For this reason you must break the additional tax charge down into the instalments that are due so far.
Example
1st instalment of £1,000 due 30 September 2010
2nd instalment of £1,000 due 30 September 2011
3rd instalment of £1,000 due 30 September 2012
(calculated and paid on time)
The tax charge increases from £10,000 to £12,000. You calculate the £600 uplift in tax now due on 12 November 2012. You should charge interest on:
the additional tax due on the 1st instalment (£200) from 1 October 2010 to 30 September 2011
the additional tax due on the 1st and 2nd instalments (£400) from 1 October 2011 to 30 September 2012
the additional tax due on the 1st, 2nd and 3rd instalments (£600) from 1 October 2012 to 12 November 2012.