Commentary on Sections Other Enforcement Powers Section 55: Order in which payments are taken to discharge debts
242.Section 55 applies where a person owes HMRC any amount arising under the Act. A person may owe different kinds of amounts to HMRC and if they have paid off some but not all of the total debt, it is necessary to have rules to determine the order in which the different debts are to be treated as paid off. The order in which debts are discharged when HMRC receives a payment towards them is:
	penalties and other amounts;
	recoverable top-up payments as defined in section 53;
	interest charged under section 51.
243.A payment only counts towards a lower priority debt if all of the higher priority debts have been discharged.
244.Subsection (3) provides that, for the purpose of determining 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 apply), amounts paid to HMRC to discharge a relevant debt are to be treated as paying off debts relating to penalties before they are treated as paying off amounts of recoverable top-up payments.
245.Subsection (4) provides that amounts paid to HMRC are treated as paying off interest only if all other amounts owing to HMRC have been paid off. Subsection (5) similarly provides a rule which ensures that amounts of recoverable top-up payments are treated as paid off before any interest can be paid off.