SAM1010 - Amend payment: claim to adjust payments on account: calculation of payments on account

Application of the rules
Calculation of payments on account
Notes
Exceptions

Application of the rules

The rules below describe the statutory basis for calculating payments on account (PoA).

Note: The split of the PoA should only be altered where there is reason to revise the PoA.

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 and/or Postgradaute Loan Repayments
  • Class 2 NICS

Payments on account 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.

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 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
4. Any amounts held over, either formally or informally, are ignored and only the collectible amount(s) are used to calculate the payments on account
5. Any odd 1p is loaded on the second PoA

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Exceptions

Payments on account are not required where

  • The previous year’s total tax and national insurance liability is less than £1000

  • More than 80 per cent of the previous year’s liability was suffered at source. 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 £1000 after a claim has been processed, are payable.