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HMRC internal manual

Debt Management and Banking Manual

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HM Revenue & Customs
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Debt and return pursuit: Self Assessment: revenue determination: calculating the amount of a determination

General
Only one return is outstanding
Two or more returns outstanding
A ‘claim to reduce’ has been made (this includes a claim to reduce the liability to nil)
SA record is in credit
PAYE income only cases
Notes for both PAYE and non PAYE customers
Legislation

General

The amount of the Revenue Determination should be based on your estimate of the probable:

  • total income tax for the year minus
  • tax deducted at source where this is known plus
  • capital gains tax.

Note: Do not include (an estimate of) Class 2 National Insurance Contributions (NIC2) for the self-employed, which was brought in to the SA regime from 2015-16 onwards. This is because NIC2 is only payable as part of the balancing charge debit and if included in the determination, the IDMS/SA systems will carry it forward in to the next year payments on account.

Check SA Notes and IDMS Action History for any relevant information and consider:

  • any local knowledge or information you may have about the taxpayer or the trade/source of income
  • the economic climate for the year(s) a determination is appropriate; for example, if a specific trade in the local area was suffering or flourishing.

Where Compliance colleagues haven’t provided a determination figure and there is no indication on SA or IDMS notes to help you estimate a figure, raise a Revenue Determination for an amount equal to or greater than the previous year (PY) or last year’s liability, and include where necessary an appropriate percentage addition to the previous year figure.

The previous or last liability may be from a determination or a return or finalised assessment (see the guide below).

This will ensure that the amount of determination has been raised taking into account ‘information and belief’ which supports the Taxes Management Act regarding the calculation of the determination figure.

If there are details of a capital gain for the year that you are considering raising a determination for, add it to your estimate accordingly. Generally, you should not include a capital gain for a previous year when calculating a Revenue Determination. However, there may be instances where including a capital gains amount is appropriate, such as in a case where there is a pattern of previous capital gains, and an element of judgment should be used. Without the return, HMRC do not have information to confirm whether CGT is appropriate or not.

Important note:

The calculations below should be used when there is no information or belief to help you calculate a determination figure and should be used as a guide only. Adjust the percentages and credit levels to take into account any information or belief you have about the taxpayer or their trade/source of income. Update SA Notes and IDMS Action History with details of how the determination figure was arrived at, and detail what information or belief was considered.

Where Compliance colleagues request a determination to be raised on their behalf, and you are satisfied the figure provided supports ‘information and belief’, there is no need to adjust the determination figure. Ensure Compliance have updated SA Notes detailing how the figure was arrived at.

Only one return is outstanding

Raise a Revenue Determination based on an amount equal to the previous year’s income tax liability plus 20% (This content has been withheld because of exemptions in the Freedom of Information Act 2000) (use function VIEW RETURN or use the total of both POAs plus Balancing Payment or Determination charge on the statement record, to obtain details of the previous year’s income tax liability).

Where there is no previous year liability, (for example a new business), (This content has been withheld because of exemptions in the Freedom of Information Act 2000) (This content has been withheld because of exemptions in the Freedom of Information Act 2000) ask the RIAT (Risk Intelligence and Analysis Team) to provide a figure for the determination.

If RIAT does not recommend a determination amount, consider making a ‘personal call’ request to obtain the return.

If we do not obtain the return:

  • assess the taxpayer’s lifestyle
  • make a Revenue Determination in an amount considered appropriate in the light of this knowledge.

Two or more returns outstanding

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Determination not raised for previous year

Raise a determination for an amount equal to the previous year’s income tax liability plus 20%; (This content has been withheld because of exemptions in the Freedom of Information Act 2000) then for subsequent years add a further 50% each year to that figure, if appropriate.

Determination raised for previous year

Raise a determination for an amount equal to the previous year’s income tax liability, (that is the determination), plus 50% (This content has been withheld because of exemptions in the Freedom of Information Act 2000) , then for subsequent years add a further 50% each year, if appropriate.

A ‘claim to reduce’ has been made (this includes a claim to reduce the liability to nil)

Raise a determination with an appropriate percentage addition on the amount of the original income tax liability, not the claim to reduce figure.

SA record is in credit

Without the filed tax returns we do not know what tax is due even if the customer intends a credit balance or payments should settle their liabilities. For example, the payments may be intended for a balance plus the next year payments on account.

Base your calculation on the previous year liability or other information you have and allow a credit balance or the payments to automatically allocate to the determinations, payments on account and other associated chargess.

However, if the sum of total payments made is greater than the sum of your determination calculation in ‘previous liability’ cases, (This content has been withheld because of exemptions in the Freedom of Information Act 2000) consult with RIAT.

Where there is no previous liability use the (This content has been withheld because of exemptions in the Freedom of Information Act 2000) amount provided by RIAT.

PAYE income only cases

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

No previous year liability

Raise a determination for the greater amount of either the projected underpayment or £1,000. Do likewise for the second and subsequent years.

Previous year liability

Raise a determination for an amount equal to the previous year’s income tax liability, if over £1,000, plus 20% if warranted.

Previous year liability and record is in credit by £1,000 or more

Raise a determination for the greater of either:

  • the previous year’s liability plus 50%
  • the amount of the credit plus 50%.

PAYE with self employment income cases

Calculate as above for the PAYE income element and add this to your calculation for the self-employed element.

Notes for both PAYE and non PAYE customers

From April 2011 the SA system will allow manual determinations to be issued for less than the previous year’s liability.

Legislation

The legislation that covers Revenue Determinations is in Sections 28C TMA 1970 (see DMBM450120).