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HMRC internal manual

PAYE Manual

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HM Revenue & Customs
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PAYE operation: double taxation claims submitted by non resident individuals: repayments in self assessment (Action Guide)

A repayment of tax may be due for the years covered by an exemption under a double taxation agreement.

Overpayment relief does not apply to repayments resulting from double taxation claims. There is no need to obtain a separate overpayment relief claim when making repayments for CY-2 or earlier.

To issue the repayment through SA, follow steps 1 - 34 below.

The guide is presented as follows:

  Steps 1 - 3
   
  Steps 4 - 24
  Steps 25 - 29
  Step 30
  Steps 31 - 34

Initial action

1. You should check that all years covered by the exemption were live SA years. Any years for which SA returns were not required should be reviewed following Action guide tax40170 and tax40181   Double Taxation Claims
   
2. Review the P14 summary screen and note the full details of the pension income that has been exempted, for all years covered by the exemption
3. Review pension details on the SA tax return to check they correspond with the details of exempted pensions on the P14 summary screen

Years prior to CY-1

Calculate amount of liable income

4. Where the effective date of exemption is the date of commencement of the pension, the total income for that year is not liable to UK tax. Go to step 6
   
5. Where the effective date of exemption is after the date of commencement of the income, you will need to apportion the total income received in the initial year of exemption to calculate the amount that remains liable to UK tax
  * In Excel, open SEES, then Other Calculators + Forms + NPPS then Dates Calculator
  * Select time apportionment tab
  Base period
  * ‘From’ date is the later of 6 April or the date of commencement of the pension
  * ‘To’ date is the following 5 April
  * ‘Amount’ is the total amount of income received for that year, in accordance with P14
  Apportionment period
  * ‘From’ date is the later of 6 April or the date of commencement of the pension
  * ‘To’ date is the day before the effective date of exemption
  This calculates the amount liable to UK tax, which is shown as ‘Apportioned Amount’
  * Print a copy of the calculation
  * Repeat for each source of income that is exempt

Calculate new SA liability - pensions

6. Print a copy of the SA tax calculation
   
7. On the SA return replace the original pension figure with the new figure as calculated at step 5 (see SAM124000 for guidance on amending SA returns)
8. Select the ‘View Calculation’ icon. This will recalculate the SA tax liability using the new figures
9. Print a copy of the revised SA tax calculation
10. Do not save the revised calculation
  * Close the SA tax return. You will be given four options ‘Full’, ‘Discard’, ‘Cancel’ and ‘Help’
  * Select the ‘Discard’ option from the menu. The changes to the SA return will not be saved

Calculate new SA liability - interest (full relief)

11. Print a copy of the SA tax calculation
   
12. On the SA return, remove the taxed UK income figure
13. In box 20 on the Residence and Remittance, page 2, enter the amount of overseas tax refundable (see SAM124000 for guidance on amending SA returns)
14. Select the ‘View Calculation’ icon. This will recalculate the SA tax liability using the new figures
15. Print a copy of the revised SA tax calculation
16. Do not save the revised calculation
  * Close the SA tax return. You will be given four options ‘Full’, ‘Discard’, ‘Cancel’ and ‘Help’
  * Select the ‘Discard’ option from the menu. The changes to the SA return will not be saved

Calculate new SA liability - interest (partial relief)

17. Print a copy of the SA tax calculation
   
18. In box 20 on the Residence and Remittance, page 2, enter the amount of the tax refundable (see SAM124000 for guidance on amending SA returns). The interest remains taxable but some relief is due
  Example
  Spanish tax relief is available at 8 per cent. We would calculate 8 per cent of the gross interest and enter the result in box 20 - Gross tax £100. UK tax £20. Spanish tax relief due to DTA £8. Therefore enter ‘8’ in box 20
19. Select the ‘View Calculation’ icon. This will recalculate the SA tax liability using the new figures
20. Print a copy of the revised SA tax calculation
21. Do not save the revised calculation
  * Close the SA tax return. You will be given for options ‘Full’, ‘Discard’, ‘Cancel’ and ‘Help’
  * Select the ‘Discard’ option from the menu. The changes to the SA return will not be saved

Calculate the amount of repayment supplement

22. Calculate the effective date of payment (EDP) following the guidance at SAM110087
   
23. Manually calculate the amount of repayment supplement using the IRIS function SARI. For further guidance on how to use SARI to calculate repayment supplement, follow the guidance in the IRIS User Guide at IRIS5000. Use the EDP as calculated at step 22. Ensure you print a copy of the repayment supplement calculation

Create freestanding credit

24. Create a manual freestanding credit following the Action Guide at SAM110082. Include the repayment supplement calculated at step 23
   

Amending CY-1

Calculate amount of liable income

25. Where the effective date of exemption is in CY-1, calculate the amount of income liable to UK tax by apportioning the income
   
  * In excel, open SEES then Other Calculators + Forms + NPPS then Dates Calculator
  * Select time apportionment tab
  Base period
  * ‘From’ date is the later of 6 April or the date of commencement of the pension
  * ‘To’ date is the following 5 April
  * ‘Amount’ is the total amount of income received for that year, in accordance with P14
  Apportionment period
  * ‘From date is the later of 6 April or the date of commencement of the pension
  * ‘To’ date is the day before the effective date of exemption
  This calculates the amount liable to UK tax, which is shown as ‘apportioned amount’. This is the amount you will enter when you amend the tax return
  * Print a copy of the calculation
  * Repeat for each source of income that is exempt

Amend SA return

26. Where the time limit for amending the return has passed, follow steps 4 - 24 above, to create a freestanding credit
   
27. Where the time limit for amending the return has not passed, amend the return by replacing the original pension figure with the new figure
  * Repeat for all exempt pensions including state pension
  * Where the new figure is less than the tax deducted from that source, go to step 29
28. Close the SA return. You will be given four options. Select the ‘Full’ option to save the changes you have made
29. If the new figure is lower than the tax deducted from that source, the amendment will not be accepted. In these cases
  * Use the full tax calculator in SEES to recalculate the liability for the year, using the amended income figures
  * Select the CRC tab to determine the entry to be made in SA
  * Enter this amount in the ‘Create Return Charge’ screen on SA

Action where an underpayment remains

30. You will need to check there is no outstanding underpayment following the application of double taxation relief. If an underpayment still exists, you should use the SA function CREATE SUNDRY CHARGE to transfer the SA stranded underpayment back into SA
   
  * Select Statement
  * Select ‘Create sundry charge’ from the dropdown menu
  * Follow the guidance at SAM140030

Final action

31. Make an SA note ‘Claim for double taxation relief - return amended (and / or FSC created) and credit repaid’. For guidance on making SA notes see SAM108022
   
32. Where the SA criteria are no longer met, make the self assessment record dormant. See SAM101090
33. Issue a new tax code following Action guide tax40170 and tax40181 Double Taxation Claims
34. If you have created a freestanding credit, pass all paperwork to your band O support to ensure that it is released promptly from work list W038. See SAM110084