SAM31043 - Compliance: enquiry work: S9A: non-contract settlement (Action Guide)

When you have finished your enquiries into an individual’s, pension scheme’s or trust’s return and a contract settlement (SAM31060) is not appropriate follow the instructions in the Enquiry Manual and steps 1 - 30 below. This Action Guide supplements the Enquiry Manual by telling you what SA and Caseflow Workbench (Legacy cases onlyCQI Workbench) functions to use on concluding the enquiry.

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

Additionally, for Legacy cases, where the enquiry record was set up using CQI Workbench function CREATE ITSA DISCOVERY, refer to the Action Guide ‘Concluding an enquiry: Using ITSA Discovery records' (SAM31046).

The guide is presented as follows

Action on date of issue of the closure notice - Steps 1 - 15
Action if an appeal is received (or after the appeal period) - Steps 16 - 18
Actions following determination of appeals - Step 19
Penalties - Steps 20 - 22
Updating SA and Caseflow Workbench (Legacy cases only CQI Workbench records - All cases - Steps 23 - 28
Summarising the enquiry and noting the SA record - All cases - Steps 29 - 30

Action on date of issue of the closure notice

1.  Prepare the closure notice, including in it your conclusions and details of any amendments necessary

2.  Check function VIEW STATEMENT for the post enquiry year. If the return has been received, and any payments are allocated to the balancing charge for that year, print a copy of the statement to refer to in step 10 below

No amendment arises from the enquiry

3.  If the closure notice accepts no amendment is needed to the self assessment and / or agrees a claim or election in the return (which does not affect the self assessment) should be accepted in full

  • Unless already done, give effect to any claim or election in the return by
  • Set-off
  • Repayment
  • If the taxpayer amended the return during the enquiry and you accept the amendment(s), use function AMEND RETURN FOR ENQUIRY or CREATE RETURN CHARGE FOR ENQUIRY to make a Revenue amendment (SAM21020) to the return
  • Follow steps 10 - 12, then go to step 23 of this Action Guide

Amendment arises from the enquiry

4.  If the closure notice gives the Revenue’s view that a different amount of tax (increase or decrease) should be included in the self assessment (including details relating to any amendment(s) made by the taxpayer during the enquiry) and / or our view as to what extent a claim or election in the return (which does not affect the self assessment) should be disallowed, follow the guidance below

Where there are unallocated credits on the record

Due to the automatic allocation rules for SA credits, if there is an unallocated credit on the record and the return is amended to create an over-repayment, the unallocated credit will automatically be allocated against the over-repayment amount and it will not be possible to remove this payment from the over-repayment or to reallocate it to another charge later

To ensure that late payment interest, if appropriate, is charged on the correct over-repayment amount, the following steps must be followed, but only in cases where there is an unallocated credit on the record

  • Select and transfer the unallocated credit(s) to OAS using function TRANSFER FROM TAXPAYER CREDIT
  • Amend the SA return as appropriate following the actions below (this action will create the over-repayment)
  • In View Statement using SA function CREATE OVER-REPAYMENT CHARGE, replace the over-repayment amount with an interest bearing over-repayment charge (SAM113031 - step7)
  • Submit a completed form SEES SA331 to AO Cumbernauld to transfer the credit(s) back to the SA record to be against the over-repayment charge. The SA331 should be sent as an attachment to an e-form to the WAM address ‘AO Cumbernauld WAM’ and be headed ‘Sch D (SA) Work Area’ in the ‘Destination Office’ details and marked ‘Priority’
  • Make an appropriate note of the actions taken

Where there are no unallocated credits on the record

  • Use function AMEND RETURN FOR ENQUIRY or CREATE RETURN CHARGE FOR ENQUIRY to make a Revenue amendment (SAM21020) to the self assessment, unless the closure notice reflects a jeopardy amendment made to the self assessment (and the jeopardy amendment is not under appeal) 

And / or, where the enquiry related partly or solely to a claim or election in the return, which does not affect the self assessment

  • Give notice to the taxpayer of the amended claim or election, and
  • Follow the instructions in the ‘Recover Over-repayment’ section (SAM112000 onwards), to recover any excess set-off or repayment given in respect of any claim or election now being disallowed in full or part 

Or, if no effect has been given to the claim or election but it is to be allowed in part

  • Give effect to any revised claim or election by
  • Set-off
  • Repayment
  • Go to step 10 of this Action Guide

Jeopardy amendment under appeal

5.  If a jeopardy amendment made to the self assessment is under appeal follow the guidance in the Enquiry Manual, and steps 6 - 9 below

6.  Check function VIEW STATEMENT and make a note of any amounts of the jeopardy amendment which are currently stood over

7.  If the closure notice reflects the jeopardy amendment, record a Revenue amendment on the SA system in the same amounts as the jeopardy amendment. This will allow subsequent amendments to be made (if necessary) when the appeal is determined

8.  If the closure notice shows an increase in tax is needed (above the level of the jeopardy amendment) record the Revenue amendment in the increased amounts

9.  Use functions MAINTAIN STANDOVERS to re-instate the standovers noted in step 6 above

In all cases

10.  If payments previously allocated to the balancing charge for the post enquiry year have been reallocated automatically as a result of the enquiry amendment, you must reallocate these payment(s) to the increased payments on account for the same year. This is to avoid an incorrect surcharge being imposed on the later year

This must be done on the same day as the enquiry amendment. Use 'Target' in function CLERICAL REALLOCATION to reallocate these payment(s). The payment must retain the same effective date of payment (EDP)

11.  (Legacy cases only still on CQI) - Use CQI Workbench function ENQUIRY DETAILS to record the date of issue of the closure notice in the Closure Date field

12.  Issue the closure notice with any accompanying calculations

Depending on the circumstances of the case, you may need to clear any underpayment or overpayment following the conclusion of the enquiry

13.  If there is an overpaid balance and a repayment has been requested, follow the guidance in business area 'Repayments' and use function ISSUE REPAYMENT FROM OVERPAID BALANCE to make the repayment, if appropriate. Note: At this stage the No Repayment signal is still set on the record, but can be overridden if there is no other reason (shown in function MAINTAIN SA NOTES) for it being set

14.  If there is an underpayment and the taxpayer has not asked for it not to be coded, follow the guidance in subject 'Transfer from SA to PAYE' (SAM141000 onwards) in business area 'Xfer of Liability'

15.  If an amount has previously been transferred to the PAYE Service and the amount to be coded out is reduced by the use of function CREATE RETURN CHARGE FOR ENQUIRY and the Last SA Return signal is set for the return year or earlier, you must review the amount coded on the PAYE Service, and deal with any adjustment necessary. (In these circumstances, the case will not appear on 'Reduction of Amount Coded Out' Work List (W037))

Action if an appeal is received (or after the appeal period)

16.  If the taxpayer appeals against the Revenue amendment

  • Use function CREATE APPEAL to record the open appeal
  • And, if the taxpayer has made an acceptable postponement application
  • Use function MAINTAIN STANDOVERS
  • To formally holdover collection of additional liability on the amendment, and
  • To informally holdover collection of payments on account for the next year to the extent they are based on the amendment
  • Example: Additional income tax and Class 4 NIC of £8000 charged in 2006-07 Revenue amendment. Payments on account for 2007-08 increased automatically by £4000 each. Appeal and postponement request received. Agreement to postpone £4000 so £2000 also informally held over on both payments on account for 2007-08
  • And, if the appeal cannot be determined by agreement
  • Submit the appeal for hearing by Tribunal. If you already have an appeal against a jeopardy amendment, ask that this appeal be heard at the same hearing

17.  If the taxpayer appeals against your notice to disallow in part or full a claim or election in the return

  • Use function CREATE APPEAL to record the appeal
  • And, if you cannot reach an agreement with the taxpayer
  • Submit the appeal for hearing by Tribunal

18.  If the taxpayer does not appeal against the Revenue amendment and you have a jeopardy amendment which is under appeal, then provided the taxpayer agrees in writing to it being determined in line with the Revenue amendment

  • Use function MAINTAIN APPEAL to close the appeal
  • Use function MAINTAIN STANDOVERS to release payments on account for next year, which were heldover informally when liability on the jeopardy amendment was postponed, otherwise
  • Submit the appeal for hearing by Tribunal

Actions following determination of appeals

19.  If you listed an appeal on taking action in step 15, 16 or 17 above do not proceed with the rest of this action guide until the appeal is determined. On determining the appeal you will also need to consider, where appropriate

  • Closing the appeal(s) using function MAINTAIN APPEAL
  • Giving effect to any finalised claim or election (or withdrawing relief where the claim or election was originally allowed in full but on appeal it has been disallowed in full or in part)
  • Using function AMEND RETURN FOR ENQUIRY or CREATE RETURN CHARGE FOR ENQUIRY to make a Revenue amendment where an adjustment is required following determination of the appeal
  • Using function MAINTAIN STANDOVERS to release liability heldover formally on a jeopardy or Revenue amendment, where no adjustment is required to the amendment following the appeal. Whether or not an adjustment is needed to a jeopardy or Revenue amendment, the function should also be used to release payments on account for next year, which were heldover informally when liability on the amendment was postponed

Penalties

20.  After formal determination of the tax geared penalties, when authority has been obtained from the appropriate Authorising Officers within CPTT or Local Compliance

  • Complete form 394(IT/CT) for issue with a covering letter explaining why the penalty is being imposed and that it is liable to interest if paid late. (Forms 394(IT/CT) available on SEES)
  • Note 1: Include a payslip using the Print Payslip application. Enter the UTR, followed by a K (for example, 8257235884K), in the ‘Reference’ field and complete the other fields as necessary
  • Note 2: On completing form 394(IT/CT) do not give it a PEN reference but instead enter the taxpayer’s
  • UTR, or if the taxpayer’s SA record is linked to a PAYE record
  • NINO
  • Use function CREATE SUNDRY CHARGE to enter the penalty on the taxpayer’s SA record. The due date will be 30 days from the date of issue of the notice
  • Use function MAINTAIN SA NOTES to record the type of penalty - 'Tax Geared Pen' for S93(5) penalties, 'S95 Pen', 'S95A Pen' and so on
  • Use function MAINTAIN SURCHARGE to cancel surcharge imposed on the liability on which the penalty is based

21.  If surcharge has been imposed on duties all of which are subject to tax geared penalties

  • Use function MAINTAIN SURCHARGE to cancel the surcharge. This action will also cancel any interest charge raised on the surcharge

22.  If surcharge has been imposed on duties of which only part are subject to tax geared penalties, you cannot use function MAINTAIN SURCHARGE to cancel the surcharge relating to the culpable duties. Instead, the surcharge relating to the culpable duties must be written off as a Class 10 remission (by following the instructions in the Debt Management & Banking Manual). If the surcharge to be remitted has already been paid you must first

  • Transfer the payment to OAS. Note: This action will also cancel any interest charge raised on the surcharge. And, after the surcharge is remitted
  • Transfer the payment back to the SA record

Note: For information on transferring payments see the Debt Management & Banking Manual

Updating SA and Caseflow Workbench (Legacy cases only CQI Workbench) records - All cases

23.  Update Caseflow guidance for caseworkers Settle: Income Tax - HMRC. (Legacy cases only still on CQI) - Use the following CQI Workbench functions, where appropriate, to record details of the enquiry

  • RISKS AND ADJUSTMENTS. Adjustment(s) must be recorded, except for Class A settlements. Details of Adjustments achieved are passed to InfoNet to provide management information. It is also used to determine the success of projects and future intervention strategies
  • QMS. The QMS Questionnaires must be completed if the In Progress QMS field has been checked in function ENQUIRY DETAILS
  • SETTLEMENT DETAILS. The details needed in this function will depend on the settlement class. Note: The settlement class recorded on the CQI Workbench determines the information you need to enter in function SETTLEMENT DETAILS
  • The settlement classes are
  • A - No change to the return figure as a result of the enquiry
  • B - Change to the return figures for one or more years as a result of the enquiry, but no additional yield. No penalty
  • C - Change to the return figures for one or more years as a result of the enquiry, resulting in additional yield. No penalty
  • 1 - Class 1A settlement (as defined in EM0100)
  • 2 - Class 2 settlement (as defined in EM0100)
  • 3 - Transferred to Special Compliance Office (SCO)

24.  Use CQI Workbench function ENQUIRY DETAILS for the enquiry year to

  • Enter the settlement date, and as necessary
  • Update other fields

When the settlement date has been entered on the record, the case is removed from the Open Enquiries List and is placed on the Settled Enquiries List

Note: The Settled Enquiries List only displays cases which have been settled in the current reporting year

25.  Use function MAINTAIN COMPLIANCE SIGNALS to check and, as necessary, add, amend or delete

  • Compliance notes
  • Third party information
  • Complex PAYE Case or Construction Industry signals

Note: It is important to keep compliance details up to date as they are used in automatic and manual risk assessment. For more information see subject ‘Compliance Signals’ (SAM32020)

26.  Use function ADD / AMEND ANNUAL COMPLIANCE DETAILS to enter or update the following for the post enquiry year

  • Mandatory Review for Possible Enquiry signal
  • Potential Selection for Enquiry Priority signal
  • Review Notes

Note: Where function CREATE RETURN CHARGE FOR ENQUIRY is used to amend the self assessment for the final enquiry year, automatic risk assessment for the post enquiry year may give a misleading result (on comparing return details for the post enquiry year with the final enquiry year). It is important to review and, if appropriate, set the above signals to ensure the return for the post enquiry year is reviewed for possible enquiry. For more information about these signals see subject ‘Compliance Signals’

The settlement date is passed overnight from the CQI Workbench to the SA record. The following day, you should check in function VIEW COMPLIANCE HISTORY that this has been done, then continue with steps 27 to 28 below

27.  Use function AMEND TAXPAYER SIGNALS to enter ‘Y’ in the following fields

  • Priority Collection Action if you consider the additional liability is a high risk debt requiring priority collection action. After setting the signal use function MAINTAIN SA NOTES to record the reason for setting it
  • No Repayment if some other reason exists for inhibiting automatic repayment. The entry in this field is changed from ‘Y’ to ‘N’ when the settlement date is passed from the CQI Workbench to the SA record (unless there is another open enquiry on the taxpayer)

28.  Use function MAINTAIN RESPONSIBLE OFFICE to set the Automatic Move (SAM31070) status to ‘N’ if some other reason exists for inhibiting automatic transfer of your responsibility for the taxpayer during a bulk transfer of SA records

Note: The entry in this field is changed from ‘N’ to ‘Y’ when the settlement date is passed from the CQI Workbench to the SA record unless there is another open enquiry on the taxpayer

Summarising the enquiry and noting the SA record - All cases

29.  Use function MAINTAIN SA NOTES to record the Caseflow reference (legacy paper files where the enquiry papers are filed)

30.  If the enquiry involved a challenge to the original status claimed, even if the challenge was not the main part of the enquiry and if that outcome is unchanged from that returned by the taxpayer, use Function VIEW TAXPAYER DESIGNATORY DETAILS and the [Residency] button to enter ‘Y’ in the Residence box to indicate UK resident or ‘N’ to indicate non UK resident. The ‘Date Domicile Set’ field should record when the UK Domicile decision was made