SAM1010 - Amend payment: claim to adjust payments on account: calculation of payments on account
Application of the rules
Calculation of payments on account
1996-97 Transitional year arrangements
Basis for calculating the 1996-97 PoA
Notes:
Exceptions
Application of the rules
The rules below describe the statutory basis for calculating payments on account (PoA). These rules were modified, to taxpayers’ advantage, for certain PoA set up manually and by the computer for 1996-97.
Where modified rules were applied, and there is reason to review the PoA because of a change in the amount payable for 1995-96, the PoA are recalculated using the statutory basis. Similarly, PoA are to be calculated on a statutory basis when they are created manually after a 1995-96 assessment is made.
Note: The split of the PoA should only be altered where there is reason to revise the PoA. In all other instances where taxpayers benefited under the modified rules, the PoA are to remain unchanged.
Calculation of payments on account
The calculated PoA are half the previous year’s Tax and NIC liability after the deduction of any
- Capital Gains Tax
- Tax deducted at source
- Underpayment transferred to PAYE
- SA Student Loan Repayments
Additional rules apply for 1996-97, the transitional year, and these are explained below.
For the years 1997-98 onwards, PoA are calculated and created automatically when
- The return is captured for the preceding year unless the record is dormant, see Note 3 and section ‘Maintain Taxpayer Record’ in business area ‘Records’ (SAM101000 onwards), or
- A Determination, Revenue amendment or Jeopardy amendment is made for the preceding year
Manual procedures exist for creating PoA when an SA year is included in a contract settlement (SAM31060) or where a discovery assessment is raised. For more information see business areas ‘Compliance’ (SAM31000) and ‘Assessments’ (SAM20000 and SAM21000) respectively.
1996-97 Transitional year arrangements
For 1996-97 where the 1995-96 Schedule A or D liability is used as the basis for calculating the PoA, the following additional rules apply
- The first PoA includes all tax arising under Schedule D Cases III to VI and Schedule A unless exceptionally, a Case V or VI source relates to earned income in which case the tax is split evenly between the two PoA
- Higher rate tax on investment income is excluded from the calculation
- Tax on income as a Member of Lloyds is excluded from the calculation (but loss relief on underwriters sources, allowed in a 1995-96 assessment, is recognised for the purposes of calculating 1996-97 payments on account)
- Tax and NIC on partners shares of Case I or II profits from a pre-6 April 1994 partnership is excluded from the calculation
Basis for calculating the 1996-97 PoA
The basis for calculating 1996-97 payments on account is the 1995-96 Tax and NIC liability on
- Schedule A or D assessments
- Direct Collection assessments
- Schedule E assessments giving rise to a Group F underpayment (Tax on all other types of Schedule E income is excluded from SA.)
When payments on account are calculated, amounts held over either formally or informally are ignored. Once an assessment is finalised, the payments on account are recalculated to take account of the agreed 1995-96 liability.
Notes:
| 1. | The calculated PoA are the most a taxpayer can be expected to pay on account of the final liability for the tax year. There are some exceptions where PoA are not required |
| 2. | The tax and NIC split is not identified on the taxpayer record and is not required for the purposes of collecting payments on account |
| 3. | Payments on account are not to be set up where all the assessed sources ceased in 1995-96 or are coded out in 1996-97 |
| 4. | Payments on account are not set up where the Last SA Return Required for Year Ending 5th April signal is set to the previous year or all the liability for the previous year is coded out |
| 5. | Any amounts held over, either formally or informally, are ignored and only the collectible amount(s) are used to calculate the payments on account |
| 6. | Any odd 1p is loaded on the second PoA |
Exceptions
Payments on account are not required where
- The previous year’s total tax and national insurance liability is less than £1000. (The £1000 limit only applies to the tax return years 2008-09 onwards, for the 2007-08 tax year and earlier the amount is £500)
- More than 80 per cent of the previous year’s liability was suffered at source (this rule does not apply when the liability for 1996-97 is calculated). The definition of tax deducted at source for the 80 per cent rule is that tax deducted at source will be the amount by which
-
- Tax actually deducted in the year, and
- Tax due for the year which is coded out in a later year, exceeds
- The amount deducted at source in respect of an earlier year
- There is an entry on the taxpayer record in the Last SA Return Required for Year Ending 5th April field equal to the previous year
- A foreign national is covered by a Tax equalisation arrangement (Regulation 102 case), see business area ‘Returns’
Note: Payments on account that total less than £500 or £1000 as applicable, after a claim has been processed, are payable.
