SAM121421 - Returns: individuals returns: computer calculation is incorrect: creating a return charge (Action Guide)

1.

Abort function CAPTURE RETURN

2.

Calculate the taxpayer’s liability manually. You may want to use the working sheet within the return guidance notes to achieve this

3.

Prepare a manual Tax Calculation for issue in a Revenue Calculation case or where you have repaired a Self Calculating taxpayer’s return

4.

Use function CREATE RETURN CHARGE to enter the liability

Note: A Section 135(5)(a) deduction may be due.

The Share Scheme supplementary pages deal with the taxable amount arising on the grant of a share option. A liability will only arise on the grant of an option under an unapproved share option scheme, and only if

• The option can be exercised more than seven years after the date it was granted

• The option price is less than the market value of the shares on the date of grant

The charge arises in accordance with the provisions of S135(2) ICTA (the measure of the charge in accordance with S135(5)(b) ICTA).

In accordance with S135(5)(a), the tax charged on the grant of the option shall be deducted from any tax chargeable on the exercise, assignment or release of the option. Where the tax charged on the grant of the option exceeds the tax chargeable on the exercise of that option, the deduction is restricted to the tax chargeable on the exercise of the option.

5.

If a Section 135(5)(a) deduction is due (given in terms of tax) you must

• Calculate the amount to be entered in the Income tax due after reliefs field. This is the equivalent of

• • Box c7.47 or w72 for 2001/02

• • Box c7.49 or w74 for 2002/03

• • Box c7.47 or w72 for 2003/04

• • Box c7.49 or w74 for 2004/05 and 2005/06

• • Box c7.49 + c7.54 + c7.55, or box w74, for 2006/07

• • Boxes A208 + A213 for 2007/08

• Reduce that amount by the S135(5)(a) deduction

• Enter the result in the Income tax due after reliefs field

• Complete any other appropriate fields on the screen

6.

Issue the Tax Calculation to the taxpayer together with a copy to the agent where form 64-8 is held

7.

Carry out the Coding (Integrity) Check and record the result on the return. You cannot record the result on the computer as the return details have not been captured

8.

Update the taxpayer’s return profile with details of the supplementary pages the taxpayer has returned using function MAINTAIN RETURN PROFILE

9.

Use function VIEW STATEMENT where the taxpayer has claimed a repayment on the return to establish

• Whether the taxpayer’s SA record shows a credit balance. If not write to the taxpayer and explain why a repayment is not due

• Whether any charges are due within the next 45 days. If so, and these reduce / eliminate the repayment claimed, contact the taxpayer and explain why a (full) repayment is not appropriate at this time

• When payment was processed (posting date). If this falls within the last 14 days the payment is an uncleared payment. B/F the papers until the 14 day period has elapsed and review the claim again

Note: Where the most recent payment is a transfer from OAS then repayment can be dealt with immediately

10.

Use function ISSUE REPAYMENT FROM OVERPAID BALANCE to make the repayment to the taxpayer, agent or nominee

11.

Where applicable set Mandatory Review for Possible Enquiry signal (SAM121595) on the taxpayer record using function ADD / AMEND ANNUAL COMPLIANCE DETAILS and select a reason for setting the signal from the drop down menu

12.

Enter additional reasons for setting the signal where more than one reason applies in the Review Notes field

13.

Check the return along with the taxpayer record for any of the following 7 situations. Where the taxpayer has made a claim to reduce payments on account see section ‘Claim to Adjust Payments on Account’ (SAM1000)

• Select the word ‘Action 1’ and so on, in the right hand column to find out the actions you need to take in each situation

Situation

Action

LU (Liability Unlikely) set on the record and the return shows Tax and / or Class 4 NIC liability

Action 1 (Word 32KB)

Date of cessation of a business shown on the return (box 7 on the Self-employment (full) page SEF1 or box 6 on the Self-employment (short) page SES 1)

Action 2 (Word 34KB)

Date taxpayer ceased to be a partner in a business shown on the return (box 4 on the Partnership (full) page PF 1 and on the Partnership (short) page PS 1)

Action 3 (Word 45KB)

Taxpayer wants to transfer surplus allowances to the spouse or civil partner (box 14 of the Tax reliefs section of the SA100 page TR 4, and box 11 of the Age related married couple’s allowance section of the Additional information page Ai 3)

Action 4 (Word 32KB)

A new pension has commenced. No action is required for 2001/02 and later as the taxpayer is not required to show details on their return.

Action 5 (Word 48KB)

An underpayment of less than £2000.00 arises and the taxpayer has not ticked the box on the return to show that the underpayment is not to be coded (box 2 in the Finishing your Tax Return section page TR 5)

Action 6 (Word 47KB)

The case has failed the Coding (Integrity) Check

Action 7 (Word 31KB)