PAYE10030 - coding: coding allowances and reliefs: community investment tax relief (CITR)

Community Investment Tax Credit scheme formally referred to as Community Investment Tax Relief (CITR) came into force on 23 January 2003. The Community Investment Tax Relief (CITM) Manual, which provides detailed guidance about CITR and the way it is administered, includes an outline of the scheme at CITM1010.

The tax relief available under the CITR scheme is based on the amount that an investor invests in an accredited Community Development Finance Institution (CDFI). Relief is given in terms of tax - equivalent to 5% of the amount invested for each of five tax years. For further details see CITM6000.

Individual investors must formally claim CITR after the end of each relevant tax year (CITM6005). However, investors within PAYE can obtain the benefit of the relief in the current year by requesting an adjustment of their PAYE code (CITM6020).

Where an individual obtains the benefit of relief through an adjustment of his current year code a formal claim must be made after the end of the tax year. So, any such individuals not already within SA should be brought into SA for the year for which the coding adjustment is made. If there is any inaccuracy in the relief given though the coding adjustment this can be corrected when the return is submitted.

Interaction with other reliefs

CITM6040 deals with the determination of Income Tax liability for the purposes of CITR. You will need to take this into account when deciding in what order to calculate various coding allowances and deductions.

Coding descriptor to use

There are no plans to introduce a coding descriptor for CITR nor a coding deduction to claw back excess relief. Instead, the coding allowance should be given in such a figure as will give the correct amount of relief. Use the descriptor CR (Concessional Relief).

Issue of P2

Issue the P2 manually with an explanation. Describe the relief as Community Investment Relief. Alternatively, you can use the freehand notes space or a separate letter for the explanation and let the computer issue the P2, but remember that the relief will then automatically be described as Concessional Relief.

How to give the relief

Calculate the relief due in terms of tax and convert this to a coding allowance. The factor you use to do this will depend on the estimated highest rate at the coded source. Where the estimated liability at the starting, basic or higher rates clearly exceeds the amount of relief due, divide the relief due in terms of tax by the taxpayer's highest rate to arrive at the coding allowance.

Where the estimated liability straddles the rates, use the best estimate you can. Bear in mind that the computer will automatically recalculate any HPAR using the net coding allowances after CITR. This could give problems in a small number of cases and before finalising the revised code, you may need to adjust your original amount for CITR to a balancing figure to collect the tax you want.