SAM142020 - Transfer of liability: regulations 72/81 and SA: checking tax credit
The notes to the SA return advise the taxpayer to enter the figure of tax shown on certificate P60. Where this is done and a Regulation 72(5) or 81(4) direction is made, the tax credit given in the calculation of liability under SA will not normally require amendment, on the assumption that the taxpayer has
- Suffered the tax claimed
- Not claimed credit for any tax which is under-deductedWhere the tax credit in the SA return has not been suffered, and a direction is made, you will be advised what amendment is necessary to the tax credit.
Tax credit in excess of P60 figure
Before completing his or her return, the taxpayer may seek your advice regarding an apparent under-deduction of tax by the employer, and the PAYE tax credit to be shown in the SA return. Regulation 185(5) entitles the taxpayer to credit for sums the employer was liable to deduct, but failed so to do, unless there is a direction that the tax shall be recovered from the employee.
When advising the taxpayer of the estimated credit to enter on the return, you should also use function AMEND TAXPAYER SIGNALS to set the No Repayment signal on the SA record. This will ensure that no repayment is made automatically. In the event of the return calculation giving rise to an overpayment, the case is entered on the ‘Inhibited Automatic Repayment’ work list for review.
On receipt of a direction
The purpose of the weekly PAYE TAX TABLE FAILURES REVIEW list is to obtain, where appropriate, Regulation 72(5) condition A directions as early as possible in the year following the year of deduction.
If the return has not been received by the time you receive a Regulation 72(5) condition A direction, you should write to the taxpayer advising him or her of the PAYE tax credit to include in the SA computation. You will want to check the credit claimed on the return in due course
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Use function MAINTAIN COMPLIANCE SIGNALS to set the Mandatory Review for Possible Enquiry signal
- Select the reason ‘Post TXN Ruling’. A ruling has been given by the Revenue on a situation before the return has been submitted
- Use the Compliance Notes field to enter details of the direction receivedIf the return has been received, refer to the supplementary page for the appropriate employment or office and check the credit claimed. You need take further action only where the tax credit given exceeds that shown in the employer’s P14 return. The Regulation 72(5) condition A direction will not show the amount, but it can usually be assumed to cover the tax notified earlier to the Recovery Office as being under-deducted.
On receipt of a direction under Regulation 72(5) condition B or 81(4) check the direction carefully, paying particular attention to any figure of tax included in the direction or covering note.
Where a Regulation 72(5) condition B or 81(4) direction is made, the direction or covering note may show that less tax, or no tax at all, was deducted by the employer, contrary to any earlier information provided. The tax credit due in the calculation of liability will require amendment. Regulation 185(5) and S59A(10) and S59B(8) are your authority to reduce the tax credit.
In practice, you are unlikely to receive a Regulation 72(5) condition B or 81(4) direction early in the year following the year of deduction. The SA return should have been received and captured. Check the credit claimed and amend it as necessary by reference to the covering note. Further advice is available in subject ‘Amending Tax Credit’ (SAM142010).