SAM1100 - Amend payment: claim to adjust payments on account: rules for calculating payments on account
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 COP
- 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 section ‘Maintain Taxpayer Record’ SAM101000 onwards’, or
- A Determination, Revenue amendment (SAM21020) or Jeopardy amendment (SAM21010) 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 (see SAM1010), 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 (TCN 9896) 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
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 (SAM1010) 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 field 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. |
