SolvedSAM31057 | Example 2 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 do not exist for the year following the year of discovery. In this example, the computation in Step 9 of the Action Guide is positive.
The facts of the case are as follows
Original amounts showing the liability for 2002-03 in CREATE RETURN CHARGE are as follows
Income tax due after reliefs – 12000.00
Class 4 National Insurance – 1500.00
Tax deducted at source – 11000.00
This gives a balancing charge debit of 2500.00
No payments on account have been created for 2003-04
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 2002 showing additional tax of £1000
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 | £12000.00 | £1000.00 |
| Class 4 National Insurance | £1500.00 | £0.00 |
| Tax deducted at source | £11000.00 | £0.00 |
| Underpayments for earlier years | £0.00 | £2500.00 |
| Overpayments for earlier years | £0.00 | £1000.00 |
In this example, the amount entered in the Underpayments for earlier years field (£2500.00) is the result of Step 9 of the Action Guide
Income tax due after reliefs – 12000.00 Plus
Class 4 National Insurance – 1500.00 Minus
Tax deducted at source – 11000.00
The entry in the Income tax due after reliefs field is then replaced by the amount of the discovery assessment, and the other two fields are reduced to nil.
The amount of the discovery assessment is also added to the Overpayments for earlier years fields. This ensures that there is no change to the original SA liability for 2002-03.
These changes result in payments on account of £500.00 each being created for 2003-04.