SAM124066 - Returns: view and amend return: return amendments: computer calculation is incorrect (Action Guide)

Follow steps 1 - 12 below

  • Where function CREATE RETURN CHARGE was used to enter the previous Individual taxpayer’s return charge because the automatic calculation would have been incorrect

Or

  • The taxpayer amendment to be dealt with would now make the automatic calculation incorrect

For details of how to access the SA functions, select ‘Index Of Functions’ on the left of the screen.

This guide is presented as follows

Function CREATE RETURN CHARGE used to enter previous return charge and the automatic calculation would still be incorrect following the amendment Or Function CAPTURE RETURN used to enter previous return charge but the amendment now means the automatic calculation would be incorrect - Steps 1 - 10
Function CREATE RETURN CHARGE was used to enter previous return charge as the automatic calculation would have been incorrect but the amendment now means the computer could correctly calculate the liability - Steps 11 - 12

Note: A Tax Calculation must be issued in all Revenue Calculation cases and in cases where a taxpayer who originally self calculated has sent an amendment and has not done a full recalculation. For the purposes of this Action Guide the words ‘……in a Revenue Calculation case’ should be read as relating to both circumstances.

Function CREATE RETURN CHARGE used to enter previous return charge and the automatic calculation would still be incorrect following the amendment

Or

Function CAPTURE RETURN used to enter previous return charge but the amendment now means the automatic calculation would be incorrect

1. Calculate the taxpayer’s liability manually. You may want to use the working sheet within the return guidance notes to achieve this

2. Prepare a manual Tax Calculation for issue in a Revenue Calculation case or where you have repaired a Self Calculating taxpayer’s amended return

3. Use function CREATE RETURN CHARGE to enter the liability

Note: A Section 135(5)(a) deduction may be due

The Share Scheme supplementary pages deal with the taxable amount arising on the grant of a share option. A liability will only arise on the grant of an option under an unapproved share option scheme, and only if

  • The option can be exercised more than seven years after the date it was granted, and
  • The option price is less than the market value of the shares on the date of grant

The charge arises in accordance with the provisions of S135(2) ICTA (the measure of the charge in accordance with S135(5)(b) ICTA)

In accordance with S135(5)(a), the tax charged on the grant of the option shall be deducted from any tax chargeable on the exercise, assignment or release of the option. Where the tax charged on the grant of the option exceeds the tax chargeable on the exercise of that option, the deduction is restricted to the tax chargeable on the exercise of the option

4. If a Section 135(5)(a) deduction is due (given in terms of tax) you must

  • Calculate the amount to be entered in the Income tax due after reliefs field
  • For years up to and including 1998-9 the equivalent of box W47, G64 or L69 on the working sheet
  • For 1999-00 the equivalent of box C11.43 on the working sheet
  • For 2000-01 the equivalent of box c7.52 or w71 on the working sheet
  • For 2001-02 the equivalent of box c7.47 or w72 on the working sheet
  • For 2002-03 the equivalent of box c7.49 or w74 on the working sheet
  • For 2003-04 the equivalent of box c7.47 or w72 on the working sheet
  • For 2004-05 and 2005-06 the equivalent of box c7.49 or w74 on the working sheet
  • For 2006-07 the equivalent of (boxes c7.49 + c7.54 + c7.55) or w74 on the working sheet
  • For 2007-08 the equivalent of boxes A208 + A213
  • Reduce that amount by the S135(5)(a) deduction
  • Enter the result in the Income tax due after reliefs field
  • Complete any other appropriate fields on the screen

5. Issue the manual Tax Calculation to the taxpayer together with a copy to the agent where form 64-8 is held

6. Check whether the amendment affects the result of the Coding (Integrity) Check recorded on the return and note the amended result if applicable

7. Check whether the taxpayer’s return profile needs updating in view of the amended details now held using function MAINTAIN RETURN PROFILE

8. View function VIEW STATEMENT where the taxpayer is now claiming a repayment to establish

  • Whether the taxpayer’s SA record shows a credit balance. If not write to the taxpayer and explain why a repayment is not due
  • Whether any charges are due within the next 45 days. If so, and these reduce / eliminate the repayment claimed, contact the taxpayer and explain why a (full) repayment is not appropriate at this time
  • When payment was processed (posting date). If this falls within the last 14 days the payment is an uncleared payment. B/F the papers until the 14 day period has elapsed and review the claim again

Note: Where the most recent payment is a transfer from OAS then repayment can be dealt with immediately

9. Use function ISSUE REPAYMENT FROM OVERPAID BALANCE to make the repayment to the taxpayer, agent or nominee

10. Check the amended return along with the taxpayer’s record where the amendment relates to any of the following 5 situations. Where the taxpayer has made a claim to reduce payments on account see section ‘Claim to adjust payments on account’ (SAM1000 onwards)

  • Select ‘Action 1’ and so on, in the right hand column to find out the actions you need to take in each situation
Situation Action
LU (Liability Unlikely) set on the record and as a result of the amendment Tax and/or Class 4 NIC liability arises Action 1 (Word 32KB)
The amendment is of a date a business ceased not previously notified (box 7 on the Self Employment (full) supplementary page SEF 1 or box 6 on the Self Employment (short) supplementary page SES 1 ) Action 2 (Word 34KB)
The amendment is of a date the taxpayer ceased to be a partner in a business not previously notified (box 4 on the Partnership (full) supplementary page PF 1 and on the Partnership (short) supplementary page PS 1) Action 3 (Word 45KB)
The amendment involves the taxpayer transferring surplus allowances to the spouse or civil partner (box 14 of the Tax reliefs section of the core return page TR 4, and box 11 of the Age related married couples allowance section of the Additional information page Ai 3) Action 4 (Word 32KB)
An underpayment of less than £3000.00 arises and the taxpayer has not entered an ‘X’ in the box on the original or amended return to show that the underpayment is not to be coded (box 2 of the Finishing your Tax Return section of the core return page TR 5) Action 6 (Word 47KB)

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Function CREATE RETURN CHARGE was used to enter previous return charge as the automatic calculation would have been incorrect but the amendment now means the computer could correctly calculate the liability

11. Use function CAPTURE RETURN to enter the complete return, including the taxpayer amendment(s) instead of what the taxpayer originally entered. Note: Where a taxpayer who originally self calculated has sent an amendment and has not done a full recalculation, you must remove the tick in the Self - Calc box in LDC to ensure a Tax Calculation is issued

12. Make a prominent note on the return that

  • The original charge was entered using function CREATE RETURN CHARGE as the automatic calculation would have been incorrect
  • That the taxpayer amendment now allows the computer to correctly calculate liability and that function CAPTURE RETURN has now been used