Working Together Issue 9

 

SA Returns: Customer Service Initiative Pilots

We have been reviewing our compliance approach with regard to SA non-business enquiries and, during 2001, set-up a working group to consider ways to improve the quality of this work and at the same time improve the standard of service to our customers.

The resulting report identified that a number of SA Returns taken up for enquiry under Section 9A were primarily of a customer service nature and could possibly have been resolved at processing/capture stage, either by means of a `repair' or a simple telephone call to the agent or taxpayer to resolve a minor query.

In order to fully test this recommendation, pilots have been set-up in two large offices, Bradford Area and Centre 1 in Scotland. The pilots will be testing the following two specific and identified areas to gauge whether the changes should be introduced nationally:-

The first involves contacting the agent or, if not represented, the taxpayer by telephone to clarify an entry on the Return where the Return is not able to be processed due to this entry. The telephone call will be made with the sole purpose of enabling the Return to be captured correctly.

The second area is the automatic `repair' of benefits or salary received from an employer, using the information provided by the employer. It is recognised that in some instances, an agent may have more current information than that available to the employer when the the forms P11D were completed, where this is thought to be the case, processing staff will be encouraged to contact the agent to confirm the correct figure. It would assist the Revenue generally if, where a figure different to that shown on the P11D is entered on the Return, a brief explanation is provided in the additional information box.

The new procedures will not inhibit our right to undertake a S9A enquiry if it is subsequently felt that one is needed.

The pilots will be monitored on a regular basis to determine the impact on the processing of Returns, impact on compliance work and to determine customer and staff feedback.

Complex Personal Return (CPR) Teams

During 2002/03 we will be taking forward our work on identifying segments of taxpayers with particular needs. People with more complex tax affairs are a group who need specialised support and attention and we are therefore setting up a small number of teams in locations which already have significant numbers of these taxpayers. Many of these taxpayers were already concentrated in a small number of offices. In setting up these teams we are simply building on this framework.

Between June 2002 and March 2003 we will be building up these teams within our new Area Management structures (locations shown below).

Each team will be part of an Area Office but the work of the teams will be co-ordinated by Geoff Lunn, who has responsibility for this segment.

(The Centre for Non-Residents (CNR) in Bootle and the Large Business Office (LBO) in Liverpool will also have responsibility for some CPR cases)

Which people will be dealt with in the CPR teams?

The CPR teams will deal primarily with people whose Returns show particularly complex features which would include large amounts of foreign or trust income, residence and domicile issues, employment issues, significant land and property income or significant capital gains/losses, or particularly high income or wealth. By dealing with these taxpayers in specialised teams we will be better able to understand and meet their needs.

We are not planning for these teams to deal with taxpayers where the main source of income is self-employment or a close company directorship and there are no signs of complexity outside the accounts. These cases will remain in the Area Office (those cases currently dealt with in the CNR and LBO teams will remain there).

How will you know which taxpayers are affected?

As each team is set up, we will write to each person concerned and their professional advisor, to explain that their tax affairs will be dealt with by that CPR team. The letter will also provide the name and direct telephone number of a personal case-owner (who will be the first point of contact for any enquiries).

What will the CPR teams be responsible for?

The CPR teams will be responsible for all the taxpayers affairs, including processing, customer service and compliance. However, for the moment, papers relating to their PAYE income (for example notices of coding), will still come from their PAYE Office, but under the direction of the CPR team.

What about ongoing enquiries with the current office?

When a CPR team takes on the responsibility for a taxpayer it will also take responsibility, in the majority of cases, for any ongoing correspondence. Teams will let taxpayers/agents know the position.

How can you help?

Once you have received a letter from us telling you that one of your clients will be dealt with in one of our CPR teams it would be very helpful if you could:

  • Send back any SA Returns for this taxpayer direct to the CPR team and not to the issuing office - we will send you an addressed label with the introductory letter.
  • Ensure that you use the CPR team address on the Return if you are using a substitute tax Return.
  • Please send all future correspondence for the people concerned to the CPR team.

Locations of CPR Teams

East Hampshire and Wight Area(at Wingfield House, Portsmouth)

West Yorks and Craven Area(at Crown House, Shipley)

Westminster Area (at Charles House, Kensington)

North East Metropolitan Area(at Tyne Bridge Tower, Gateshead)

Birmingham Solihull Area(at City Centre House, Birmingham)

Queensway House, East Kilbride(the name of this Area has not yet been announced)

Chapel Wharf Area(at Trinity Bridge House, Salford)

Business Support Teams

Business Support Teams (BSTs) were formed in 1999 as a result of the Chancellor's Budget Statement committing the Revenue to offer national support to new/small businesses and employers in view of the Government's recognition of the significant burdens these sectors had to cope with. Up until April 2001 the BSTs concentrated on providing payroll support to new and small employers but following the Grabiner Report, their remit was expanded to provide enhanced support to new and small businesses. Although their primary responsibility is to new/small businesses and employers, the BSTs will however provide education to all types of businesses and employers on specific new Government initiatives such as tax credits. We want agents to feel able to encourage their clients to contact the BSTs to use their services, where this could be advantageous.

The BSTs provide help to customers through specially trained Business Advisors in two main ways:

in one to one consultations, usually at the business premises but also at any location convenient to the customer. The BSTs will also, if asked, check that the customer's record keeping systems or payroll processes are adequate

at half day workshops covering subjects relating to payroll or business matters.

For employers there are the following workshops:

Paying your Employees

How to work out employees' tax and National Insurance, the records which need to be kept and where to go for further help.

Calculating NICs for Directors

Explains the special rules for calculating directors' NIC and also about the higher rates of tax and `K' codes.

Paying Expenses and Giving Benefits to Employees

Covers the most common types of expenses and benefits and explains what tax and NIC will be due.

Statutory Sick Pay (SSP)

Explains how to pay SSP to eligible employees.

Statutory Maternity Pay (SMP)

Explains how to pay SMP to eligible employees and what to do if an employee is not eligible.

Paying Tax Credits

Explains how to pay tax credits to employees and what records need to be kept.

Collecting Student Loans

Explains how and when to deduct Student Loan repayments.

End of Year Returns

Explains how to complete End of Year Returns, the forms which need to be sent to the Inland Revenue and the dates they are due.

Tax Bulletin Article - Revenue Accountants

The April edition of Tax Bulletin includes an article on Revenue Accountants. The Revenue employs approximately 90 accountants, mainly based in Area Offices, Large Business Office and Special Compliance Office. They are there to advise Inspectors on accountancy and related commercial matters. In particular they advise on whether, in their view, accounts comply with the UK Generally Accepted Accounting Practice (GAAP) and show a true and fair view. www.inlandrevenue.gov.uk/bulletins/index.htm

E-Services for Agents

Agents are a critical component of the Revenue's Internet Service strategy and last year saw the introduction of new services specifically for agents. These included a Self Assessment Internet filing service for agents, an improved registration process and further forms added to our PAYE Internet Service.

The Revenue is working very closely with agents to understand the benefits they are seeking from electronic services and the barriers to overcome. Two examples of this are:

a recent workshop held in Shipley (home of the Electronic Business Unit) with agents and commercial software developers to identify priority areas for improving the Internet based Self Assessment service.

the Design Shop held in Luton last April with agents, software vendors and companies to identify the Internet services for companies that our customers wanted and would use. We are currently working with 32 agents to make sure the service that enables agents to view details of their client companies' liabilities and payments provides the information that is required.

If you are interested in using the Internet Corporation Tax Service and being able to see details of your client companies' liabilities and payments online please email your details to jane.ashton@ir.gsi.gov.uk

This input, and the feedback we have received via Working Together, has enabled the Revenue to identify and prioritise developments for this year. Agent initiatives we are currently working on include:

  • the ability for agents to view clients' SA Statements of Account and payments and liabilities via the Internet
  • the development of an agent specific portal providing access to relevant content for the professional practitioner
  • aiming to remove the remaining limited number of restrictions on the type of forms and circumstances under which Tax Returns can be sent over the Internet. The issue of the submission by agents of supplementary non-statutory information with the Return is also under consideration
  • investigating the use of collaborative workspaces where the Revenue, agents and their clients can share documents and information in a secure environment
  • working closely with agent software developers to help them fully integrate e-capability within the products they make commercially available.

In April we launched our SA Online 2002 product targeted at unrepresented individuals and agents filing for less than five clients. SA Online 2002 now supports a wider range of supplementary pages and an improved user interface based on feedback from last year. We have further simplified the registration process for our 4 million unrepresented SA customers and over the next month we will be issuing letters to them, pre-registering them to use the Internet service for Self Assessment.

Information on the Revenue's e-business services for agents can be found on the Inland Revenue website at www.inlandrevenue.gov.uk/ebu/age_index.htm

The Electronic Business Unit provides further help. Contact 0845 60 55 999 or email helpdesk@ir-efile.gov.uk. The Helpdesk is available 0800-2200 weekdays and 1000-1800 weekends.

ITSA Enquiries - New Framework

Thank you for your feedback on our article on the new framework for ITSA enquiries. There are two particular points which we have been asked to clarify.

When does the new framework come into operation?

The framework is operating now for all new and existing enquiries, though it will take some time to deliver additional training and before our existing enquiry staff are fully familiar with this new approach to enquiry work.

What effect does this have on CTSA enquiries?

As a result of the review, a number of issues have been raised as to the appropriateness of the framework document in relation to Corporation Tax Returns. We are currently looking at how these outcomes can be translated and whether there are any legislative issues that would require a different approach.

Budget - Changes to the CT600 Return

While generally claims affected by Finance Bill 2002 cannot be made until Royal Assent some of the measures take effect immediately, such as the rates of tax and marginal rate fractions applicable for Financial Year 2002 starting 1 April 2002, and the changes for CIS deductions. Other measures will take effect (subject to Royal Assent) from a variety of dates.

The revised prints of the CT600 will not be available until late October 2002. In the meantime we will be including a CT600 Budget Insert (April 2002) summarising the main changes with every Notice to Deliver a company tax return (form CT603) we issue for:

  • accounting periods ending on or after 1 April 2002, and also
  • from May, with every order for forms CT600 from the CTSA Orderline.

If, exceptionally, companies need to deliver their Return for a period ending on or after 1 April 2002 before the new prints of form CT600 are available they can do so if:

  • the current 2001 print contains all the entries they need to make, and
  • provided they use the new rates of tax and fractions, and
  • follow the guidance on CIS deductions.

Where the new nil starting rate of corporation tax applies, to complete the CT600 correctly, "0.00" % should be entered in the tax rate box (boxes 51 if FY2002 is the second FY or box 41 if, exceptionally, FY2002 is the first FY). The tax rate boxes should not be left blank.

If a company is affected by any other of the new measures it should await enactment and the new prints of form CT600.

Improving the SA Database

Over the 5 years since Self Assessment was introduced, some of the information held on our database has become out of date and errors, such as duplicate records, have begun to creep in. We spent some time last year identifying the causes of these errors and now during this year, we plan to carry out some special work exercises to improve the quality of the information held on our database. These exercises will include:

  • updating out of date addresses
  • correcting invalid and inadequate addresses
  • merging duplicate records
  • checking cases where self-employment has ceased (to ensure that the "Last Return" signal has been set on the SA system where appropriate).

We would also appreciate your assistance in improving the SA database. It would be helpful if you would you let us know about cases for the current return year where

  • a duplicate Return has been issued to your client, or
  • a Return has been issued to a client who ceased self-employment and therefore a Return will no longer be required.

Please would you contact your client's Tax Office with details. We will then be able to correct our records before the work exercises are carried out.

Changes to BACS Information

In issue 5 of Working Together we told you that from December 2002 we changed the way in which we transmit BACS (Banker Automated Clearing Service) information. When the repayment goes into the account of an agent or nominee, we still show that the repayment has originated from the Revenue but we now include the name of the client.

Many of you wrote to Working Together telling us that in some cases the name of the client is still failing to appear on the bank statement. Our findings have shown that this only happens where banks have insufficient character space on their computer system to show the credit type followed by the client's name. Because of this they are unable to specify on the agent or nominees bank statement who the repayment is for - the only information shown is the credit type, `IR-SA Repayments'. As a result of this problem, we have now changed the credit type to simply `SA.'. This ensures character space is now available to show all or at least the majority of the client's name.

If you still experience problems, please get in touch with the Working Together Team; contact details are given below..

Carry Back of Personal Pension Contributions

We have been asked to clarify some points about the carry back of personal pension contributions.

The rules for claims to carry back payments made on or after 6/4/01 mean that:

  • only contributions made between 6 April and the following 31 January in a tax year can be carried back
  • those contributions can only be carried back to the previous year.

A carry back election:

  • must be made to the scheme administrator on or before the time of payment and
  • is irrevocable

Form of Election

An election to carry back a contribution, or part of one, to the previous year should be made to the scheme administrator who may accept an election:

  • on a form PP43 (new)
  • in a letter, fax or email or
  • by telephone. In this case, scheme administrators should confirm the details in writing. This confirmation will include the date of the actual election, the date of payment and the amount to be carried back.

Claims to Higher Rate Relief

A taxpayer who makes a personal pension payment and who is liable to tax at the higher rate can claim higher rate relief by including the payment on their Self Assessment Tax Return.

Where a contribution has been carried back to the previous tax year, a claim to higher rate relief can be made:

  • on the Self Assessment Tax Return, or if that has already been submitted
  • in a Schedule 1B (stand alone) claim.

The stand alone claim can be made

  • on a form PP43 (new). This may be the original or a copy, where the scheme have retained the original;
  • on a form PP120;
  • in a letter. The letter will be accepted by the Revenue without supporting documentation from the scheme administrator, provided that it contains all the necessary details i.e. date of election, date of payment and amount to be carried back.

The claim to higher rate relief can quite properly be made after the payment and election have taken place, and in some cases after 31 January. For instance, the scheme administrator could have the payment and the election to carry back a few days before 31 January. They would then send the scheme member a form PP43 (new) for completion to claim higher rate relief. The member would send a copy of the completed form to the Tax Office. Although the form was completed and dated after 31 January, that in itself does not invalidate the claim.

Retirement Annuity Contracts

The new rules do not apply to premiums under retirement annuity contracts taken out before 1 July 1988.

New Booklet 490 - Employee Travel: A Tax and NICs Guide for Employers

We have recently published an updated edition of Booklet 490 (2002). The changes are limited to removing obsolete material and bringing in references to recent legislative developments, particularly the mileage allowance legislation that will apply with effect from 6 April 2002 for both tax and NICs.

SA - Collection of Underpayment through PAYE

Many of you have asked for clarity regarding the coding of underpayments when a Return is submitted after 30 September.

The date of 30 September is significant for 2 reasons as follows:

1. For all SA taxpayers who want the Inland Revenue to calculate their liability, this is the legislative date by which their completed SA Return must be received by the Department.

By concession we will calculate the tax due for Returns received after this date but we cannot guarantee to do so in time to advise the taxpayer of how much to pay by 31 January following the end of the tax year concerned. It remains the taxpayer's responsibility to make the necessary payment by the due date in these cases.

2. For an SA taxpayer who wants their underpayment of tax collected through their tax code there is no legislation that requires us to do so. However, the Revenue will usually code out such underpayments in all cases provided that: i. The complete SA Return is received by the Department on or before 30 September and ii. The Balancing Payment is less than £2,000 and iii. The PAYE source will enable the whole underpayment to be collected in one year

Our guidance also says that when an SA Return is received in the period 1 October to 30 November, we will try to code the underpayment by 31 December.

The reason why we cannot guarantee to code out these underpayments is that much depends on each Area's capacity to process the Returns they receive. To meet our commitment to code out underpayments arising from Returns received by 30 September these Returns must be fully processed by 31 December. This ensures that these underpayments are picked up by the Annual Coding Main Review which is run in early January. Only after the Returns received by 30 September have been processed will each Area start to process Returns received from 1 October to 30 November.

Automatic coding of SA underpayments

We are currently working on a change that will enable the computer system to automatically code out underpayments arising from the processing of SA Returns. We are aiming to introduce this in autumn this year. By automating this process it may be possible for us to extend the date by which e-filers must send us their Return if they want their underpayment coded out, to 31 December. We will update you on this in the August edition of Working Together.

Dormant Trusts - Windfall Payments from Demutualisations

In some circumstances where life policies are held in trust, windfall payments that arise from demutualisations may give rise to a capital gain on the trust. If the windfall is then invested by the trust, this may also lead to an ongoing liability to income tax. Where the trust is otherwise regarded as dormant for tax purposes because it has no income, and no likelihood of income or gains, no SA return will normally be issued.

In such cases it is important to be aware of the trustees' legal responsibility for notifying the Trust District of chargeability to income tax and/or capital gains tax for any year for which no Return is issued.

SA Cases - Estimated PAYE Underpayments from April 2002

In issue 6 of Working Together we told you that from April 2002 estimated underpayments would no longer be coded out automatically in SA cases. An estimated PAYE underpayment arises where, for example, there is an increase in benefits in year, resulting in a reduced code number. The estimated underpayment is calculated on the difference in the allowances from April to the date the code number was changed. To ensure that we do not collect this estimated underpayment in one lump sum, the revised code is put on a week 1/month 1 basis for the remainder of the tax year.

Underpayments will now be taken into account in the SA calculation for that year. The first year this applies is 2002/03 i.e. any estimated underpayment arising in 2002/03 will not be coded out in the 2003/04 coding. Instead, the actual liability will be calculated when we process the 2003 Return.

We will still code out underpayments for SA taxpayers where the: -

  • taxpayer requests this and
  • completed Return is received by 30 September and
  • tax owed is less than £2000

When we calculate or amend an estimated underpayment we will give an explanation on the coding notice (P2) that we will collect any underpayment through the SA balancing payment. This will be calculated when the Return for the year is processed.

Cases moving into SA

When an estimated underpayment is created before a taxpayer's record moved into SA, we will already have said on the P2 that we will code it out. However, if the SA record is set up before the Annual Coding Main Review in early January (January 2003 is the first year), we will now collect the underpayment through the SA balancing payment. We will advise you accordingly.

Where the SA record is set up after the Annual Coding Main Review, the estimated underpayment will already have been included in the code number for the following tax year. We will only remove this if requested by you or your client.

Cases moving out of SA

When the estimated underpayment is created before a taxpayer's record is moved out of SA, we will already have said on the P2 that we will collect it through the SA balancing payment. However, if the taxpayer's record is moved out of SA before the Annual Coding Main Review in January, we will now collect it through the coding. We will advise you accordingly.

In cases where the taxpayer's record is moved out of SA after the Annual Coding Main Review, we will already have said on the P2 that it will be collected through the SA balancing payment. We will in fact code this out and advise you accordingly.

Non SA Taxpayers

There has been no change in the way we handle non-SA taxpayers.

Advice to Employers and Agents on Termination Payments

Fresh guidance has been sent to Inland Revenue staff after reports from employers and accountants highlighted inconsistencies in the way we were dealing with enquiries on termination payments and benefits.

We are committed to enabling customers understand their rights and obligations and to providing all the information and advice needed to find answers to problems. In some cases this might mean just sending a leaflet. But termination payments and benefits cases can be complex and may involve employment and contract law as well as tax law. So in other cases it could mean taking the time to talk through the facts in more detail.

We shall be monitoring the situation with the help of Network colleagues and through feedback from employers and tax practitioners.

For advice on Termination payments and benefits, contact your PAYE Inland Revenue Office (in this case, not the Employer's Helpline).

The Revenue's general policy for dealing with enquiries is in Code of Practice 10 available from

any Inland Revenue Office

the Leaflets Orderline 08459 000 404 or

www.inlandrevenue.gov.uk click on specialist

The official guidance on termination payments and benefits is in the Schedule E Manual and is available under open government from

www.inlandrevenue.gov.uk click on Manuals, find Schedule E and look at SE 12820 onwards or

ask any Inland Revenue Office for a print-out of relevant extracts.

Tax Return - 2001-02 changes

The wording on pages 1 and 2 has been changed so that it is more explicit about supplementary pages. This is to help taxpayers identify the supplementary pages more easily.

Question 14 and Help sheet IR330 have been revised to reflect the new rules for Personal (including Stakeholder) Pension Relief

Question 16 has been revised so that it now includes Children's Tax Credit. There is a new Help Sheet, IR343: Claiming Children's Tax Credit When Your Circumstances Change.

There is a change to box 3.81 on the Self-employment Pages and there is a new Help Sheet, IR234: Averaging for Creators of Artistic and Literary Works

Some minor changes have been made to the Share Schemes, Lloyd's, Foreign Pages and Notes to reflect the withdrawal of the paying and collecting agents arrangements.

Trust and Estate

For some trusts and estates, Land and Property or Capital Gains supplementary pages are being included at the back of the Return. There is different wording on pages 1 & 2 to make identification of the supplementary pages easier.

Question 8 has changed a little.

The Trust and Estate Lloyd's and Foreign Pages have been revised to reflect the withdrawal of the paying and collecting agents arrangements.

Partnerships

Partnership statement (full) and Foreign Pages reflect the cessation of paying and collecting agents arrangements.

Editorial

Working Together is a joint initiative 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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