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22 October 2000
My client is a subcontractor in the construction industry and suffers tax deduction at source on all his earnings.
By 31 January 2000 he had paid £2,028.88 by deduction against a liability of £2,067.69. My client did not settle the difference (due 31 January 2000) until 13 April 2000. However, on examining the Revenue's calculation of interest on the late settlement, it has only given credit for the £2,028.88 payment from 5 April 2000. Interest has been charged from 31 January 2000 to 5 April 2000 on the £2,067.69 as though no payment had been made at that date.
By 31 January 2000 he had paid £2,028.88 by deduction against a liability of £2,067.69. My client did not settle the difference (due 31 January 2000) until 13 April 2000. However, on examining the Revenue's calculation of interest on the late settlement, it has only given credit for the £2,028.88 payment from 5 April 2000. Interest has been charged from 31 January 2000 to 5 April 2000 on the £2,067.69 as though no payment had been made at that date.
My client is a subcontractor in the construction industry and suffers tax deduction at source on all his earnings.
By 31 January 2000 he had paid £2,028.88 by deduction against a liability of £2,067.69. My client did not settle the difference (due 31 January 2000) until 13 April 2000. However, on examining the Revenue's calculation of interest on the late settlement, it has only given credit for the £2,028.88 payment from 5 April 2000. Interest has been charged from 31 January 2000 to 5 April 2000 on the £2,067.69 as though no payment had been made at that date.
We notified the local Inspector before 31 January 2000 of the amount paid by deduction and offered to submit the CIS25s but our offer was declined and we were advised that they should be submitted with the client's tax return issued in April.
Thus my client has been charged interest on £2,067.69 when in fact all but £38.81 had been paid by 31 January 2000. Is there any defence to this injustice?
(Query T15,696) SWW.
For years up to 1995-96 the Inland Revenue would certainly accept SC60 certificates on an ongoing basis and allow direct offset against instalments due under Schedule D tax assessments. With effect from 1996-97 the concept of assessments under different schedules has in practice vanished and the self-assessment form requires a global calculation of liabilities from all sources.
The availability of relief for CIS25 tax deductions (and previously SC60 deductions) is covered by section 559, Taxes Act 1988. Subsection 4(a) and 5 confirm that such deductions are to be treated firstly as income tax and secondly as Class 4 National Insurance contributions due in respect of the trade, profession or vocation under which the deductions have been made.
It is noted that any excess is, by virtue of section 559(5), still strictly available for repayment after the liability on the particular trade, etc. has been satisfied, but this schedular approach is of course effectively redundant under self assessment.
If 'SWW' was sure that his client's tax deductions would be sufficient to cover the overall liability, he should have made a claim to reduce payments on account. When the self-assessment return was completed and submitted after the year-end, any claim for deductions would have been entered in Box 3.92 with the effect that the Box 18.3 liability figure would be a negative repayment amount. With no liability arising, the question of interest would not then apply. — Marco.
CIS25 tax deductions are treated the same as tax deducted under pay-as-you-earn. Therefore final tax positions can only be agreed by the Inland Revenue when the tax return and CIS25s have been submitted, with the tax deducted being used to reduce the overall liability for that year, with any resulting balance representing the final tax liability (as per Box 18.3 on the return). It should be remembered that it is this latter figure on which the following year's payments on account are based.
I would therefore suggest that the client's return, together with the CIS25s, be submitted to the Inland Revenue as soon as possible. Then, following its processing, the client's Statement of Account will be amended; if there is a reduction in the 1999-2000 final liability compared with that of 1998-99, as a result of the CIS25 tax deductions, the payments on account for 1999-2000 will be reduced accordingly, as will the interest charged.
The way around any future problems caused by the tax due under payments on account is to use the form SA303 to reduce the amounts — to nil if necessary. However, it appears that the 'problem' is mainly a one-off. This has been caused by the changeover as from 1 August 1999, with the Inland Revenue treating the CIS25 tax deductions relating to the year in which they were deducted. Previously with regard to SC60 tax they were allowed a much wider point of view in respect of the year of allocation and set-off. — NK.
Extract from reply by 'Man of Kent':
The following is recommended. Submit at once all CIS25s in hand, analysing them between tax years. Unless the balance of £38.81 is covered by CIS25s emerging since January 2000, pay it now, to stop interest running. Explain (to the District Inspector) that the CIS25 payment dates are all before 31 January 2000. If that fails, simply refuse politely but absolutely to pay the interest. If the Revenue sues, let it show the judge where it is enacted that CIS25 tax shall be deemed to be paid otherwise than at the date of the certificate.
By 31 January 2000 he had paid £2,028.88 by deduction against a liability of £2,067.69. My client did not settle the difference (due 31 January 2000) until 13 April 2000. However, on examining the Revenue's calculation of interest on the late settlement, it has only given credit for the £2,028.88 payment from 5 April 2000. Interest has been charged from 31 January 2000 to 5 April 2000 on the £2,067.69 as though no payment had been made at that date.
We notified the local Inspector before 31 January 2000 of the amount paid by deduction and offered to submit the CIS25s but our offer was declined and we were advised that they should be submitted with the client's tax return issued in April.
Thus my client has been charged interest on £2,067.69 when in fact all but £38.81 had been paid by 31 January 2000. Is there any defence to this injustice?
(Query T15,696) SWW.
For years up to 1995-96 the Inland Revenue would certainly accept SC60 certificates on an ongoing basis and allow direct offset against instalments due under Schedule D tax assessments. With effect from 1996-97 the concept of assessments under different schedules has in practice vanished and the self-assessment form requires a global calculation of liabilities from all sources.
The availability of relief for CIS25 tax deductions (and previously SC60 deductions) is covered by section 559, Taxes Act 1988. Subsection 4(a) and 5 confirm that such deductions are to be treated firstly as income tax and secondly as Class 4 National Insurance contributions due in respect of the trade, profession or vocation under which the deductions have been made.
It is noted that any excess is, by virtue of section 559(5), still strictly available for repayment after the liability on the particular trade, etc. has been satisfied, but this schedular approach is of course effectively redundant under self assessment.
If 'SWW' was sure that his client's tax deductions would be sufficient to cover the overall liability, he should have made a claim to reduce payments on account. When the self-assessment return was completed and submitted after the year-end, any claim for deductions would have been entered in Box 3.92 with the effect that the Box 18.3 liability figure would be a negative repayment amount. With no liability arising, the question of interest would not then apply. — Marco.
CIS25 tax deductions are treated the same as tax deducted under pay-as-you-earn. Therefore final tax positions can only be agreed by the Inland Revenue when the tax return and CIS25s have been submitted, with the tax deducted being used to reduce the overall liability for that year, with any resulting balance representing the final tax liability (as per Box 18.3 on the return). It should be remembered that it is this latter figure on which the following year's payments on account are based.
I would therefore suggest that the client's return, together with the CIS25s, be submitted to the Inland Revenue as soon as possible. Then, following its processing, the client's Statement of Account will be amended; if there is a reduction in the 1999-2000 final liability compared with that of 1998-99, as a result of the CIS25 tax deductions, the payments on account for 1999-2000 will be reduced accordingly, as will the interest charged.
The way around any future problems caused by the tax due under payments on account is to use the form SA303 to reduce the amounts — to nil if necessary. However, it appears that the 'problem' is mainly a one-off. This has been caused by the changeover as from 1 August 1999, with the Inland Revenue treating the CIS25 tax deductions relating to the year in which they were deducted. Previously with regard to SC60 tax they were allowed a much wider point of view in respect of the year of allocation and set-off. — NK.
Extract from reply by 'Man of Kent':
The following is recommended. Submit at once all CIS25s in hand, analysing them between tax years. Unless the balance of £38.81 is covered by CIS25s emerging since January 2000, pay it now, to stop interest running. Explain (to the District Inspector) that the CIS25 payment dates are all before 31 January 2000. If that fails, simply refuse politely but absolutely to pay the interest. If the Revenue sues, let it show the judge where it is enacted that CIS25 tax shall be deemed to be paid otherwise than at the date of the certificate.
