SAM20050 – Assessments:
assessments within SA: pensions etc taxable on the amount accruing
in the year ('accruals basis')
In many cases, the taxable pension income for a tax year is the
amount accruing in that year irrespective of when any amount is
actually paid. Where the 'accruals basis' applies, the pension etc
should be assessed on the amounts that the pensioner is
entitled to in the tax year.
EIM74101 gives guidance for 2003-04 and later tax years and
lists the pensions and annuities that are taxable on the 'accruals
basis'. For details about Social Security income, also taxed on the
accruals basis, see EIM76004.
SE74101 onwards gives guidance for 2002-03 and earlier
years.
Pensioners are often content to pay income tax on the amount
received in a year as, in most years, the amounts accruing and
received are similar. However, it is possible in certain
circumstances for the amounts to be substantially different, and
assessments are required.
If a taxpayer requests the statutory basis this should be
accepted.
Assessments should
not be raised for years where
- The taxpayer did not make SA returns. For these
years the PAYE underpayments should be calculated and net
underpayment at the end of the last non-SA year should be recorded
on the SA record using function CREATE SUNDRY CHARGE (Net
Underpayment)
- The time limit for taxpayer amendments has not
expired. For these years treat the amount accruing as a taxpayer
amendment
Notes:
- The assessments should not be made until the SA return for the
year in which the payment was made has been received. It is
important that you record the PAYE underpayment and / or taxpayer
amendment for earlier years on the SA system
first, to ensure that any overpayment for the
latest year is not repaid, where it needs to be set against these
earlier years
- If you are notified of the payment by the pension provider,
before the return is received, you should set the No Repayment
signal on the SA record, to prevent a repayment being issued
automatically when the return is captured
- The relevant due date for Section 86 interest purposes will be
the statutory dates for the year of assessment. However, see Note 4
below
- Any available credit from the PAYE tax deducted in the year
when the pension was received should be transferred to OAS to be
allocated back to the SA record with an effective date of payment
(EDP) equal to the relevant dates
