SolvedSAM31056 | Example 1 of updates needed in function CREATE RETURN CHARGE
From HM Revenue & Customs · Self Assessment Manual
This example shows you the updates which are needed in function CREATE RETURN CHARGE after making a discovery assessment, where payments on account exist for the year following the year of discovery.
The facts of the case are as follows
Original payments on account for 2002-03 are £4000 each
SA return for 2002-03 shows liability of £10000 giving rise to a balancing charge of £2000, that is, £10000 less £8000 payments on account
S9A enquiry opened and, subsequently closed in May 2004. No amendment required to 2002-03 self assessment
Undisclosed source of untaxed interest comes to light in August 2004
Discovery assessment made in September 2004 showing additional tax of £1000
Note: This revises the liability for 2002-03 to £11000
Action on making discovery assessment
1. Function CREATE REVENUE ASSESSMENT used to enter a charge on the taxpayer’s SA record equal to the additional tax of £1000. The following entries are made in the function
| Field | Entry | Notes |
|---|---|---|
| Year | 03 | Not Applicable |
| Total | 1000 | Not Applicable |
| First POA | Nil | Not Applicable |
| Second POA | Nil | Not Applicable |
| Balance | 1000 | Assessment charge set up on SA record which is due 30 days from date of using the function. But relevant date for interest remains 31/01/2004. The charge will be described as Assessment for Tax Year 2002-03 on the taxpayer’s statement |
2. Function CREATE RETURN CHARGE used for 2002-03 to make the following entries
| Field | Current | Amended |
|---|---|---|
| Income tax due after reliefs | £10000 | £11000.00 |
| Overpayments for earlier years | £0.00 | £1000.00 |
The effect of amending the Income tax due after reliefs figure to £11000 is to increase the payments on account for 2003-04 to the correct amount, that is, £5500 each. The entry of £1000 in the Overpayments for earlier years field ensures that there is no overall change to payments on account / balancing charge for 2002-03 on the SA record with net liability remaining at £10000.
The position on the SA record for 2002-03 is now as follows
1st payment on account for 2002-03 £4000
2nd payment on account for 2002-03 £4000
Balancing charge for 2002-03 £2000
Assessment charge for 2002-03 £1000