Working Together Issue 10

 

Contents

Automatic Carry Back Claims at Last!

From 6 April 2002 we have been able to process carry back claims automatically. This applies where a claim under Schedule 1B is made in an original Self Assessment Return. A further enhancement to deal automatically with Schedule 1B claims in amended Returns is being worked on for 2003/2004.

The SA system will take the figures from boxes 18.5 and/or 18.8 (or the calculated relief in a Revenue Calculation case) and consider the accounting position for the current Return year and previous year. Automatic Freestanding Credits will then be created with the correct Effective Date of Payment and these will be posted to the Statement of Account at the same time as the information from the Return. These Credits will be allocated firstly to any outstanding charges using the current payment allocation rules and repayments plus any repayment supplement due will be generated automatically.

We are delighted that we have been able to implement this complex but very worthwhile change to the SA system. Delays in processing carry back claims were the source of many complaints from taxpayers and their agents.

"Sanity Check"

The Working Together Team has received a number of complaints in instances where Box 18.3 has been repaired inappropriately as a result of details on the Return being input incorrectly or missed.

In July a message was sent to Area Directors, managers and staff working on Self Assessment. The message reiterated existing instructions in the SA Manual. These instructions say that in all cases where the total tax due in Box 18.3 does not agree with the computer calculated value, the Return should be reviewed to confirm that all entries have been copied correctly.

Working Together 10th Edition

As this is our 10th edition of Working Together, we thought that you would find it helpful to have an index of all the articles which have featured in each edition. The index is on the Working Together featured area of the Inland Revenue website at www.inlandrevenue.gov.uk/working together/publications/index.htm

We will continue to update this index with articles, as they appear in future issues of Working Together.

If you would like a paper copy of the index, please contact the Working Together Team. Contact details are below.

PAYE Estimated Underpayments from New Car Benefits

In Working Together issue 6, we asked for your feedback on the way in which new car benefits are coded. Many thanks to everyone who wrote to us.

Your response was in favour of coding out a full year's benefit in the first year, instead of the actual amount. As a result we have reminded our staff that they can do this if you or your client makes this request at the time the benefit is first made available.

Coding the annual amount as opposed to the actual amount of benefit is unlikely to avoid an estimated underpayment altogether as there is usually always a delay between the start of the new benefit and the date the coding is expected to operate. However, this will be a much reduced underpayment.

SA Taxpayers

The underpayment will be taken into account in the SA calculation for that year.

Non SA Taxpayers

We will code out this underpayment in the following tax year.

The code will operate on a non-cumulative basis for the remainder of the tax year unless you or client requests otherwise. However, if there is a further change made to the tax code, which results in an increase in allowances, we will re-instate a cumulative tax code.

Payment Allocation

When a Self Assessment payment is processed, this is automatically allocated, in the majority of circumstances, in the order that is most advantageous to the taxpayer.

The order is:

1. The amount payable (charge) with the earliest Statutory Due Date (SDD);

2. within each SDD, to the charge for the earliest tax year;

3. within each liability period (tax year), the order in which the charge was created, starting with the earliest created charge.

(Note: Where an amendment to the self-assessment increases the amount due, the SDD of the original charge determines the allocation order).

Once a payment is allocated to a charge, then that allocation is only automatically disturbed if the underlying charge is reduced resulting in an overpaid amount. Occasionally the resulting automatic reallocation may not reflect an agreed payment allocation. In such cases your client's Tax Office can reallocate payments accordingly.

We also printed an article in the November 2000 edition of Working Together issue 3, regarding `Special Allocation of SA Payments'. This article referred to specific allocation requests made at the time of payment and the advice to refer these to the appropriate Tax Office still applies.

The Future of the Electronic Lodgement Service

Since the inception of the service in 1997 ELS has proved an effective means for agents to file SA Returns electronically and last year accounted for over 340,000 Returns.

In 2001 the Revenue introduced an Internet based filing solution for agents. This year many of the tax preparation software vendors have launched software which enables agents to file the core personal Return and the most commonly used supplementary pages by this service.

The Revenue is committed to developing further the Internet Service for Agents and it plans to commence to roll out further services within the next twelve to eighteen months including:

  • Extension of scope to cover Partnership and Trust Returns
  • Continued removal of restrictions on filing complex Returns
  • Providing the ability to access Statement of Accounts online and view payments and liabilities
  • Improving the registration and client authorisation functionality
  • Exploring how further forms and information can be made available online

We are also working on the issues associated with the electronic submission of supplementary non-statutory information.

Feedback from ELS users, both directly and through Working Together, has indicated that, whilst many see the future is in Internet based services, users wish to continue with ELS until the new services have proved successful. In response to this feedback we are extending our support of the ELS system to at least April 2004. This means we will continue to offer a full ELS service to cover the 2002/2003 Tax Return.

Longer term we recognise that agents and software vendors are looking for certainty on which to base their investment and planning decisions. We would therefore like your help to reach a firm decision on the options for ELS. Details of how you can contribute are available on our website www.inlandrevenue.gov.uk/ebu/news/index.htm.

Changes to BACS Information - Correction

In Issue 9 of Working Together, on page 5 in the article "Changes to BACS Information", the first line should have read December 2000 rather than December 2002.

Sorry for any confusion this may have caused.

Statutory Clearances - "One Stop Shop" - NOT CURRENT

Following recommendations made in the Review of Links with Business, published towards the end of last year, the Revenue has set up a pilot exercise to trial a "One Stop Shop" approach to making clearance applications.

In this first step we have concentrated on demerger, purchase of own shares and S707 clearances. Where clearance is required for one or more of those provisions, you should now send one single application letter to:

Clearance and Counteraction
1st Floor
22 Kingsway
London
WC2B 6NR

If the application contains information that is Stock Market sensitive then the application should be sent to Ray McCann at the same address.

Applications can be faxed to 020 7438 4409 but please ring Ray McCann before you fax Stock Market sensitive information. His number is 020 7438 6585.

You can help us to deal with your application quickly by showing clearly at the top what clearances you are applying for.

Capital Gains Tax Clearances

We hope over the next few months to extend the "One Stop Shop" arrangements to include all Capital Gains tax clearances. In the meantime, where a Capital Gains tax clearance is required, a separate application letter should be sent to:

William Perrett
Sapphire House
550 Streetsbrook Rd
Solihull
West Midlands
B91 1QU

Further Information

If you need information or advice about how these changes will apply please telephone: 020 7438 6585

If you have sent an application for clearance for a demerger, purchase of own shares or S707 and you have not received either an acknowledgement or other letter from us within 10 working days of sending your application to us please telephone: 020 7438 7474

Information on the "One Stop Shop" and other clearances is also available on the Inland Revenue website at: www.inlandrevenue.gov.uk/cap.

Please also see our article "Speeding up Your Clearance Applications - S703 ICTA 1988" in Working Together issue 6.

This article originally appeared on the What's New page of our featured area of the Revenue's website.

Self Assessment - Late Filing Penalties

Automatic late filing penalties (under S93(2) and (4) Taxes Management Act 1970), cannot exceed the tax liability for the year. So in cases in which the tax due is less than £100 (or £200 as appropriate), the SA computer system will automatically reduce (cap) the penalty to the amount shown in Box 18.3 of the Return.

In addition the penalty should be capped where the amount shown in Box 18.3, less any amounts paid at the filing date is less than the penalty. Up until now this has had to be done clerically and in cases where this was missed, it led to unnecessary appeals and complaints.

From October 2002, the computer system will be changed to automatically cap the penalties to the amount in Box 18.3 less any amounts paid on or before the statutory filing date.

Please remember that we won't know to cap a penalty until we have processed the Return and established the liability for the year. However, if the penalty is issued after a late Return has been processed the Penalty Notice will reflect the capped amount, even if this is nil. If the amount of tax and Class 4 National Insurance Contributions payable is later increased, the penalty will also increase and interest will be charged.

One-Person Companies - Dispensations

Working Together Register of Issues item 9.15 (see our featured area on the Revenue's website at www.inlandrevenue.gov.uk) reflects difficulties experienced in practice by one-person companies in obtaining a dispensation from reporting business expenses on form P11D. In Working Together Issue 5, in response to agents' difficulties experienced in practice, we published an item entitled "So, can a One-Person Company ever get a Dispensation, or not?"

The article explained that, for a limited class of expenses - such as fully vouched expenditure necessarily incurred on travelling in the performance of his or her duties - there is no reason why a dispensation should not be considered by the Inspector on its merits. This is so, notwithstanding that for a one-person company no independent check is possible.

We have now updated our published leaflet on dispensations, IR69 - "Expenses payments and benefits in kind. How to save yourself work". This makes it clear that a dispensation may be considered for controlling directors who decide their own expenses, provided the expenditure is vouched by independent documentation. We have also updated the guidance in the Schedule E Manual at SE30059, which is published under Open Government, to make this clearer too.

This article originally appeared on the What's New page of our featured area of the Revenue's website.

Business Support Teams - More Courses

In addition to those listed in the article in our last edition, the following courses are available:

For employers:

End of Year Returns of Expenses and Benefits - Explains how to complete the relevant forms, the forms which require completion and the dates they are due.

For the self-employed there are the following workshops:

Starting in Business - Explains the basics of tax, National Insurance and VAT including registering, record keeping and when to pay.

Self Assessment for the Self-Employed - Aimed at sole traders and partnerships, it explains how to complete the SA Return and covers expenses and allowances which can be claimed, the dates which must be met and how to pay the tax due.

In addition to the employer and business series listed above, there are also the following workshops:

The Construction Industry Scheme for Contractors - Designed for contractors, it explains the ID card and voucher system.

The Construction Industry Scheme for Subcontractors - Designed for subcontractors it explains how the scheme works from their perspective.

Setting up a Limited Company - Explains the necessary requirements in setting up a limited company.

IR35 - Calculating the Deemed Payment

The services which the Business Support Teams provide, are free. A booking with the local Business Support Team can be made via the website at www.inlandrevenue.gov.uk/bst/index.htm

For the self-employed, contact can be made with the Business Support Teams through the Helpline for the Newly Self-Employed on 08459 15 45 15.

For employers, contact can be made through the New Employer's Helpline on 0845 60 70 143.

Pension Schemes

Audit & Pension Schemes Services (APSS) came into being in April 2001 when the Revenue re-organised into business streams. They are responsible for all the work previously dealt with by Pension Schemes Office and their role involves regulating and enabling activities. The work on approval and maintenance of pension schemes for tax relief purposes is dealt with in Yorke House in Nottingham. They have been joined by Audit colleagues from the former Financial Intermediaries and Claims Office (FICO) who, along with other work, are involved in some audits of Pension Providers.

Areas also have an important role to play in Pension Scheme compliance with responsibility for the issue of the Income Tax Self Assessment Return (SA970) to all Self-Administered Schemes.

APSS has set up a new team dedicated to customer relations and learning, to improve and develop enabling activities in line with the Modernising Government White Paper.

APSS works closely with National Insurance Services to the Pension Industry (formerly Contracted-out Employment Group) and jointly attend events such as the Pension Show and Employer Talk. They also deliver workshops to groups of independent financial advisers, in events jointly organised with their professional bodies AIFA and SOFA, and deliver tailored events for trustee/administration companies.

There is a specific pension area on the Revenue website at www.inlandrevenue.gov.uk/pensionschemes, where you can find

  • copies of guidance material
  • frequently asked questions
  • further details of our organisation
  • details of events

To discuss any customer relations issues on pensions please contact Paul Cottis on 0115 974 1692, Mary Thompson on 0115 974 1572 or Ruth Leachman on 0115 974 1423 and for audit matters Rob Smith on 0115 974 1489. Other queries should go to our helplines 0115 974 1600 for Occupational Pension Schemes matters and 0115 974 1777 for Personal Pensions.

Timings of Coding Notices and End of Year Returns

Many of you have asked us whether there is any possibility of changing the issue dates of the employer's/contractor's End of Year Returns (P35/CIS36) and Coding Notices (P2). You have told us that these often lead to queries from your clients during January when you are working to meet the 31 January filing date. The Working Together Team took this issue up with Head Office colleagues in response to your feedback.

Forms P2

The Revenue does understand the point that agents have made, and the possibility of moving the P2 issue date has been investigated in depth before. After the main coding run, there is the annual State Pension uprating in mid January. This is followed in mid February by the supplementary coding run. We need to allow time for appeals and queries to be dealt with before the implementation of the codes from 6 April. And we have to ensure that the codes are in place for the new tax year in time for employers to operate them on the first payday. Employers, particularly the large ones, need lead time to program their payroll systems. The possibility of moving the issue date to December has also been considered, but the earlier a code for the following tax year is issued, the more likely that it would have to be amended, leading to more work for everyone all round.

End of Year Returns

The amount of output during the first quarter of the year is exceptionally heavy. And constraints of time, equipment and staffing mean that it is not feasible to significantly alter the date of issue of these forms, and any changes that were made would have an adverse impact throughout the whole programme.

Automatic Coding of Underpayments for 2001/2002 - Tax Returns Sent Electronically

In Working Together issue 9 (May 2002) we told you about changes we were working on to automate the process of coding out SA underpayments.

From 4 October 2002 our SA computer system will be changed so that 2001/2002 SA underpayments of less than £2000 can be automatically collected by restricting the PAYE code for 2003/2004. This currently has to be done clerically. This change to the system means that we can extend the dates by which we guarantee to code out the underpayment, if the Return is filed electronically. The extended dates will apply to future years.

It is important to note that the extended date depends upon the method of electronic submission used.

The new extended dates for automatically coding out underpayments are:

New date Electronic method for sending tax return

29.12.2002 Electronic Lodgement Service (ELS) - 2001/2002 Tax Returns sent using ELS need to be sent by this date

30.12.2002 *Internet - 2001/2002 Tax Returns sent over the Internet need to be sent by this date

*You can find out more about our Internet service for agents at: www.ir-portal.gov.uk/index.jsp.

Contact details

For more information about the above or other Inland Revenue e-business services, either visit online at www.inlandrevenue.gov.uk and select Internet services or e-business or contact our e-Business Helpdesk on 0845 60 55 999. The Helpdesk is open between 08:00 and 22:00 Monday to Friday and from 10:00 until 18:00 Saturday and Sunday.

Alternatively, you can contact us

  • by e-mail at helpdesk@ir-efile.gov.uk - or
  • Fax: 01274 841288 - or
  • Minicom: 01274 841278

Returns Filing - Tips

We thought we would take this opportunity to share some tips with you on Returns filing. All of these come from discussions at local Working Together meetings between practitioners and Revenue colleagues.

  • Box 3.97 asks for the amount tax deducted under the Construction Industry Scheme. It also specifically asks that the CIS25s are sent with the Return. These are often not enclosed.
  • Box 18.7. When the box is ticked to indicate a claim to reduce payments on account, there is a legal requirement to give a reason in the additional information box. This is often left blank.
  • The Boxes starting at 19.8B authorise any repayment to be made to the taxpayer's agent. Please ensure that the authority is signed by your client at Box 19.12.
  • If you are submitting a partnership Return along with the partners' Returns, please do not staple them all together or put them inside each other. If this is done, there is more of a chance of them being missed, especially at peak filing periods.
  • Please complete the details in Boxes 22.1 to 22.7. This helps us give a better service to customers. Completing the agent's telephone number in Box 22.2 would be particularly useful.

Errors in 2001/2002 Tax Returns and Guidance

There are a number of small errors in our published material for 2001/2002, which we would like to draw to your attention.

Not all of these corrections will affect your clients' Tax Returns. But if you are using any of the material mentioned below, please make the necessary amendments.

Individual Tax Return

Capital Gains Pages: SA108 - There is an error in the text at the side of Box F3 on page CG1. This requests that a loss entered in box F3 is carried forward to box F7, Total Taxable Gains. This is incorrect. A loss in box F3 should be carried forward to page CG8 and box F7 left blank.

Notes on Capital Gains Pages: SA108 (Notes) - Example 23 on page CGN21 shows an incorrect `subdividing house' figure of £50,000. The figure should be £5,000.

Tax Calculation Guide: SA151W - There are 2 typing errors:

  • page 3. The text above the "Other deductions" box reads "boxes 15.2 + 15.7 + 15.8 + 15.10". It should read "boxes 15.1 + 15.7 + 15.8 + 15.10".
  • page 16, final box w136. The text above this says "w131 minus w135". It should say "w134 minus w135".

Comprehensive Tax Calculation Guide: SA151C - There is a typing error on page 16, box c7.28.

  • The text should read, "Boxes (4.76 x 10) +10.17 + 10.20 + 7.12 + 7.30".

Private Residence Relief Help Sheet: IR283 - Example 3 has been duplicated as Example 4 on page 2 of the Help Sheet. Example 4 should be deleted and all subsequent examples renumbered.

Trust and Estate Tax Return

Tax Calculation Guide: SA951

Calculation Help above box T1.46 - There is an error in the text shown in this calculation help box. This refers to box T1.36 this is incorrect. The correct reference is to box T1.35.

Bullet point above boxes T1.66 and T1.67 - An incorrect reference is giving the instruction to insert zero if a negative amount is calculated. This reference should be removed. The correct wording should be Deduct repayable tax.

Reference above Box T5.9 - The incorrect reference is shown above box T5.9. This refers to box 21.4 this is incorrect. The correct reference is to box 21.6.

These corrections have been shown against the relevant material on the Self Assessment area of the Revenue website at www.inlandrevenue.gov.uk/sa/forms/net_01-02.htm

editorial

Working Together is a partnership with the CIOT, ICAEW, ATT, ACCA, ICAS and AAT. Although the material in this publication obviously reflects discussion and consultation with these bodies, the Revenue is solely responsible for its contents and for the views expressed in it.

contact details & back issues

Back issues can be downloaded from our featured area on the Revenue website www.inlandrevenue.gov.uk. - If you would prefer a paper copy, please write to or e-mail the address below. Working Together is covered by Crown Copyright. There is no objection to firms copying the publication for their own use. Anyone wishing to re-publish Working Together or extracts more widely, should write for permission to

Greig Rattray

Working Together Team
7N South West Wing
Bush House
London
WC2B 4RD

or e-mail: Greig.Rattray@ir.gsi.gov.uk.

   
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