SAM121421 | Returns: individuals returns: computer calculation is incorrect: creating a return charge (Action Guide)

Where you identify that the computer calculated liability will be incorrect follow steps 1 - 11 below. For details of how to access the SA functions, select ‘Index Of Functions’ on the left of the screen.

1. Abort function CAPTURE RETURN

2. Calculate the taxpayer’s liability manually. You may want to use the full tax calculator (for the relevant year) on SEES to do this

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

4. Use function CREATE RETURN CHARGE to enter the liability

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

Box 1 in the ‘Share Schemes’ section on page Ai2 of the ‘Additional Information’ pages deals 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

5. 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. This is the equivalent of

• Box c7.47 or w72 for 2001/02

• Box c7.49 or w74 for 2002/03

• Box c7.47 or w72 for 2003/04

• Box c7.49 or w74 for 2004/05 and 2005/06

• Box c7.49 + c7.54 + c7.55, or box w74, for 2006/07

• Boxes A208 + A213 for 2007/08

• 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

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

7. Update the taxpayer’s return profile with details of the supplementary pages the taxpayer has returned using function MAINTAIN RETURN PROFILE

8. Use function VIEW STATEMENT where the taxpayer has claimed a repayment on the return 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. Enter additional reasons for setting the signal where more than one reason applies in the Review Notes field

11. Check the return along with the taxpayer record for 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)

• Select the word ‘Action 1’ and so on, in the right hand column to find out the actions you need to take in each situation