TFC31700 | Childcare accounts: relevant debts

Childcare Payments Act 2014, section 55(3)

In order to determine whether a relevant debt is an amount of recoverable top-up payments (so that, for example, the rules in subsections (5) to (8) of section 53 of the Act apply), amounts paid to HMRC to discharge a relevant debt are treated as paying off debts relating to penalties before they are treated as paying off amounts of recoverable top-up payments.

When interest is the relevant debt

Childcare Payments Act 2014, section 55(4)

Amounts paid to HMRC to discharge a relevant debt are treated as paying off interest only if all other amounts owing to HMRC have been paid off.

When recoverable top-up payments are the relevant debt

Childcare Payments Act 2014, section 55(5)

Amounts paid to HMRC to discharge a relevant debt are treated as paying off recoverable top-up payments before any interest can be paid off.

In summary, a payment only counts towards a ‘lower priority’ debt if all the ‘higher priority’ debts have been discharged. The priority order is:

1. penalties

2. recoverable top-up payments

3. interest