Readers’ forum: How best to allocate payments

Payment conundrum

I am aware that HMRC’s default position is that any payments are allocated against the earliest liabilities.

Usually this will be in the taxpayer’s favour but there are some cases when it will not. I am dealing with one at the moment.

My client has already breached the 12-month late payment threshold for 2018-19 so any further delay in payment for that year will not increase the penalty. However for the subsequent year payment would mean that further late payment penalties can be avoided.

Currently my client does not have enough funds to meet all outstanding liabilities. I understand that in principle my client can allocate a payment against a specific liability and that HMRC would be bound to accept this.

My question is how this can be done in practice given that the allocation has to be made before the payment is actually...