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14 February 2001
Replies to Queries – 4
It's so unfair!
An employed client with no other income was issued with a self-assessment return. On completing this, I found she had tax underpaid for the year due to her employment being on a 4 week payroll and there was a 'week 56' receipt during the year.
It's so unfair!
An employed client with no other income was issued with a self-assessment return. On completing this, I found she had tax underpaid for the year due to her employment being on a 4 week payroll and there was a 'week 56' receipt during the year.
Replies to Queries – 4
It's so unfair!
An employed client with no other income was issued with a self-assessment return. On completing this, I found she had tax underpaid for the year due to her employment being on a 4 week payroll and there was a 'week 56' receipt during the year.
According to the tax return guide, the figure per the P60 should be entered on the employment pages and no mention is made of week 56 adjustments. On checking with the Inland Revenue, I was advised that no adjustment is due under self assessment and that the underpayment stands. If a taxpayer with a week 56 payment does not complete a return, then the 'underpayment' is not collected.
Given that those taxpayers liable at 40 per cent will no doubt complete a return and as such have their underpayments collected whilst those at basic rate will not, it does seem to discriminate against the higher rate taxpayer. Should those at basic rate contact the tax authorities to declare that they have a tax liability for the year? The employer is a local authority and therefore there is little chance that it will alter its pay periods to avoid this in future years.
(Query T15,755) – LP.
Does the Inland Revenue have a duty to exert itself and collect all the tax that is (likely to be) legally due from anyone within their jurisdiction? In R v Commissioners of Inland Revenue ex parte National Federation of Self-Employed and Small Businesses Ltd [1981] STC 260 objections were raised to an amnesty granted to a large group of Schedule E taxpayers who had long avoided tax with flagrant dishonesty.
Did the Revenue have a power to dispense particular individuals from their tax obligations? Students of history may recall that exercise of a dispensing power got some Stuart kings into trouble. The Court of Appeal thought that some person or persons should be able to call the Revenue to account but the House of Lords let the Revenue off the hook by treating the matter as one within the care and management of taxes allowed by section 1(1), Taxes Management Act 1970. The action taken (or not taken) was intended to avoid the waste of public time and money in a pursuit which would have been counter-productive of future efficient collection.
The structure of pay-as-you-earn is complex enough without seeking to introduce yet further refinements. These could exacerbate the scale of collation and integration of information within the Revenue, as well as burdening employers unreasonably. It follows that non-collection in some areas is defensible and is not open to attack by a section of the taxpaying population. – Elder.
It would indeed be a formidable task of taking on the administrative duo of local government and the Inland Revenue in this matter. This advice is therefore somewhat academic.
Where 53 pay days occur for weekly paid employees, 27 for fortnightly or 13 for four weekly, the tax due on the last payment in the year is calculated by reference to the tax tables (free pay) at weeks 1, 2 and 4 respectively. Payment in week 53, etc. is normally taxed on a week 1 basis. This would, in turn, create an underpayment owing to an additional 1/52 of allowances given (but codes BR or DO might give the correct result!).
In the case of 'LP's' client, the week 56 payment, followed by self assessment gives rise to no more tax than is actually due for the year and the consolation may be that payment of the liability is considerably delayed whether by direct payment some 10 months later or longer if via a coding adjustment.
No week 53, etc. adjustment is due as, for 1989-90 and subsequent years, the emoluments of an office or employment are assessable on a receipts basis rather than earnings basis. There are no de minimis amounts (allegedly) under self assessment as far as underpayments are concerned. 'LP's' client must unfortunately, therefore, pay on this occasion.
This scenario may appear to be a case of discrimination, but is it perhaps more of a Robin Hood situation rather than the sexist variety as with the widow's bereavement allowance?
'Lottery' may be a more appropriate term considering the number of higher rate Schedule E taxpayers who are not issued with returns.
It is not felt that basic rate taxpayers in this situation should feel obliged to notify the Revenue – even if by some remote chance they were aware that they should do so. Employers have complied with the Revenue's Guide to PAYE & NICs (CWG2 [2000]) in calculating the liabilities. Section 205, Taxes Act 1988 allows the Board of Inland Revenue to accept that correct pay-as-you-earn deductions satisfy the tax due. No (self) assessment need be made each year. – Jim.
It's so unfair!
An employed client with no other income was issued with a self-assessment return. On completing this, I found she had tax underpaid for the year due to her employment being on a 4 week payroll and there was a 'week 56' receipt during the year.
According to the tax return guide, the figure per the P60 should be entered on the employment pages and no mention is made of week 56 adjustments. On checking with the Inland Revenue, I was advised that no adjustment is due under self assessment and that the underpayment stands. If a taxpayer with a week 56 payment does not complete a return, then the 'underpayment' is not collected.
Given that those taxpayers liable at 40 per cent will no doubt complete a return and as such have their underpayments collected whilst those at basic rate will not, it does seem to discriminate against the higher rate taxpayer. Should those at basic rate contact the tax authorities to declare that they have a tax liability for the year? The employer is a local authority and therefore there is little chance that it will alter its pay periods to avoid this in future years.
(Query T15,755) – LP.
Does the Inland Revenue have a duty to exert itself and collect all the tax that is (likely to be) legally due from anyone within their jurisdiction? In R v Commissioners of Inland Revenue ex parte National Federation of Self-Employed and Small Businesses Ltd [1981] STC 260 objections were raised to an amnesty granted to a large group of Schedule E taxpayers who had long avoided tax with flagrant dishonesty.
Did the Revenue have a power to dispense particular individuals from their tax obligations? Students of history may recall that exercise of a dispensing power got some Stuart kings into trouble. The Court of Appeal thought that some person or persons should be able to call the Revenue to account but the House of Lords let the Revenue off the hook by treating the matter as one within the care and management of taxes allowed by section 1(1), Taxes Management Act 1970. The action taken (or not taken) was intended to avoid the waste of public time and money in a pursuit which would have been counter-productive of future efficient collection.
The structure of pay-as-you-earn is complex enough without seeking to introduce yet further refinements. These could exacerbate the scale of collation and integration of information within the Revenue, as well as burdening employers unreasonably. It follows that non-collection in some areas is defensible and is not open to attack by a section of the taxpaying population. – Elder.
It would indeed be a formidable task of taking on the administrative duo of local government and the Inland Revenue in this matter. This advice is therefore somewhat academic.
Where 53 pay days occur for weekly paid employees, 27 for fortnightly or 13 for four weekly, the tax due on the last payment in the year is calculated by reference to the tax tables (free pay) at weeks 1, 2 and 4 respectively. Payment in week 53, etc. is normally taxed on a week 1 basis. This would, in turn, create an underpayment owing to an additional 1/52 of allowances given (but codes BR or DO might give the correct result!).
In the case of 'LP's' client, the week 56 payment, followed by self assessment gives rise to no more tax than is actually due for the year and the consolation may be that payment of the liability is considerably delayed whether by direct payment some 10 months later or longer if via a coding adjustment.
No week 53, etc. adjustment is due as, for 1989-90 and subsequent years, the emoluments of an office or employment are assessable on a receipts basis rather than earnings basis. There are no de minimis amounts (allegedly) under self assessment as far as underpayments are concerned. 'LP's' client must unfortunately, therefore, pay on this occasion.
This scenario may appear to be a case of discrimination, but is it perhaps more of a Robin Hood situation rather than the sexist variety as with the widow's bereavement allowance?
'Lottery' may be a more appropriate term considering the number of higher rate Schedule E taxpayers who are not issued with returns.
It is not felt that basic rate taxpayers in this situation should feel obliged to notify the Revenue – even if by some remote chance they were aware that they should do so. Employers have complied with the Revenue's Guide to PAYE & NICs (CWG2 [2000]) in calculating the liabilities. Section 205, Taxes Act 1988 allows the Board of Inland Revenue to accept that correct pay-as-you-earn deductions satisfy the tax due. No (self) assessment need be made each year. – Jim.
