Originally posted by MrsB1974
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For example;
You're in a scheme in 2010 and received income of £100. You paid £10 of tax.
In 2015, HMRC decide that you should have paid £40.
They issue an APN for £30 which you pay at the due time.
In 2017 your scheme gets a final Court decision as to liability. This is set at £35.
You get a final assessment for £35. You have paid £40, being £10 in 2010 and £30 in 2015.
You are due a refund of £5.
BUT, you owe interest on £25 (final £35 less £10 originally paid) from 2010 to 2015. Let's say £7.
HMRC owes you interest on £5 (£30 APN less final balance due £25) from 2015 to 2017, say £1.
Net position in 2017:
Tax refund £5
Interest due to HMRC £7
Interest due to you £1
You owe HMRC £1.
Notification arrives via an assessment and notice on your HMRC account.
The settlement calculation is irrelevant in the above scenario. The settlement is HMRC's current view of liability. A Court may decide that it is incorrect and impose their own version. The Court's opinion will take precedence.
There is a well established principle that HMRC's opinion, published or not, is just that, an opinion. You cannot rely upon it being correct. Only a Court can give a final decision.
A settlement procedure is essentially an agreement between you and HMRC that whatever that final decision, both parties give up their right to reopen the calculation. They are usually said to be unbreakable but if there is a massive difference between the settlement and the final decision I can see that position being challenged. I'm not lawyer enough to guess at the answer there.
Hope this helps.
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