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HMRC internal manual

Self Assessment Manual

Amend payment: claim to adjust payments on account: introduction

Making a claim
Processing a claim
History of claims
Structured Action Requests (SAR)

Making a claim

Taxpayers can make a claim to reduce or increase the payments on account that they expect to pay. A claim can also be made by an agent on behalf of the taxpayer.

A claim to adjust payments on account is made where the taxpayer believes

  • The expected liability under SA, after deducting tax paid at source, but including any higher rate liability, will be less than that determined using the rules for calculating payments on account (see SAM1100), or
  • There will be no SA liability or that any such liability will be covered by tax deducted at source

Notes:

1. Expected liability
   
  The expected liability is the total estimated liability to income tax and Class 4 NIC for the year on all sources including any giving rise to higher rate tax.
From the 2015-2016 tax year, the Class 2 NICS amount paid by self-employed customers will be collected through SA as part of the SA Balancing Charge. Class 2 NICS will not be included when calculating the expected laibility for calculating payments on account.    
    Legislation requires the total income tax and Class 4 NIC liability to be estimated before deciding whether to make a claim to reduce. This means that the liability on all sources must be considered. The estimate of the liability must include not only higher rate tax on taxed investment income but also the tax/NIC on any new source.
    For example, taxed income assessed in say 2013-14 is not used in the calculation of 2014-15 payments on account. However, when considering whether to make a claim to reduce payments on account in this example, a taxpayer must have regard to the total estimated liability for 2014-15 including higher rate tax.
    You are not expected to question whether a claim has been made on the correct basis. But where you receive an enquiry, either with or without a claim, you should explain that all sources are to be considered when estimating the liability for the year.
    The expected liability under SA might be lower because
    * Income has decreased
    * Allowances or reliefs are higher
    The expected payments on account can decrease even though the total liability under SA has increased. This might happen if a greater proportion of the total income is taxed at source.
  2. Claim to tax relief under the EIS or VCT scheme
    If a taxpayer wishes to claim income tax relief under the EIS or VCT scheme during the year, and it is not possible to make an adjustment to the PAYE code, relief can be given against their payments on account. To receive the relief the taxpayer must make a claim to adjust in the usual way, giving full consideration to their expected final liability for the tax year. If the claim they make proves to be excessive when the return is received then interest will be charged on any reinstated amount from the relevant due dates of the payments on account. Relief must not be given through the SA system in any other way.

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Processing a claim

Digital forms

From April 2017, customers have the option to complete a digital form SA303 through their Government Gateway account and the request to reduce, or increase, the payment on account will be automated.

In the majority of cases, no manual actions will need to be taken but there will be exceptions which can only be worked manually. These will include cases where the information given on the digital form does not match the information held by HMRC, such as NINO, Name and address and cases which the following signals are set – Bankruptcy (BY), Enquiry, Enforcement, RLS, Expat, HNWU, CPR, PD1,Time to Pay (TTP) or Deceased. These cases will be listed for further action.

Where the system has not been able to accept the request to amend the payments on account, the customer will be sent SEES letter SA811 automatically giving the reason why and requesting further information, if required.

Where the system has been able to process the request digitally, an automatic SA note will be made as follows:-

Increase in POA

‘Simple, SA303, Date received (from DMS), DMS ID (From DMS), Affirm active Action not in summary. REASON XXX.XX new amount created in the two fields XXX.XX as requested by the Taxpayer. Entry noted to have not been reflected in the Current Summary Statement.

Decrease in POA

‘Simple SA303, Date received (from DMS), DMS ID (From DMS), Affirm active Action REASON XXX.XX new amount created in the two fields XXX.XX as requested by the Taxpayer. Automation completed’

Where the claim is an ‘Exception’, the following SA Notes will be shown:- 

Late submission

Complex SA303, Date received (from DMS), DMS ID (From DMS) Late submission Manual process required. REASON SA303 rejected as the time limit for applying has expired. SA811 issued, Automation completed

PoA Not Accepted as Tax Return already Captured for that year

Simple SA303, Date received (from DMS), DMS ID (from DMS), SA303 rejected as Return already captured for that year. SA811 Issued Automation completed

PoA Accepted but address needs changing

Simple, SA303, Date received (from DMS), DMS ID (from DMS) Affirm active Action, REASON £XXX.XX new amount created in the two fields £XXX.XX as requested by the Taxpayer. Automation completed. Manual process required REASON Please update Customer address

PoA same on screen as claim to reduce

Simple, SA303, Date received (from DMS), DMS ID (from DMS), PoA adjustment NFA as PoA is the same as adjustment requested Automation completed

No ITR received

Simple, SA303, Date received (from DMS), DMS ID (from DMS), PoA adjustment. NFA as tax returns for relevant year have not been submitted. SA811 Issued, Automation completed

No PoA to be made

Simple, SA303, Date received (from DMS), DMS ID (from DMS), PoA reduction NFA as there are no payments on account to be made, SA811 Issued, Automation completed

Complex cases

These are cases where the name and address do not match, or any of the following signals are set –Bankruptcy (BY), VA, Enquiry, Enforcement, RLS, Expat, HNWU/CPR, PD1, Time to Pay or Deceased. Note: The automatic process will not be able to access PD1, HNWU, CPR or Expat cases, and so the DMS item will be noted.

In these cases, the automatic process will stop and make an automatic SA note, if possible, for the appropriate reason as follows:-

Name doesn’t match

Complex, SA303, Date received (from DMS), DMS ID (from DMS), Manual process required. REASON: Submitted details of the Taxpayer Name and System records do not match

Foreign Address

Complex, SA303, Date received (from DMS), DMS ID (from DMS), Manual process required. REASON: International address

Incorrect Address

Complex, SA303, Date received (from DMS), DMS ID (from DMS), Manual process required. REASON: Submitted details of the Taxpayer Address and System records do not match

DMS Note for incorrect NINO

Complex, SA303, Date received (from DMS), DMS ID (from DMS), Manual process required. REASON: Incorrect format received for the Customer ID

PD1

Complex, SA303, Date received (from DMS), DMS ID (from DMS), Manual process required. Follow PD1 guidelines

Signals

Complex, SA303, Date received ( from DMS), DMS ID Indicator Manual process required. REASON: Check Taxpayer individual signals

These requests are picked up from the appropriate DMS queue for manual attention.  

Paper forms     

Where paper forms SA303 are received all Network Offices and Banking Operations (Cumbernauld and Shipley) can process a claim to adjust payments on account if they have responsibility for the taxpayer record. An office receiving a claim to adjust payments on account must give the claim priority attention.

Before a request to adjust payments on account is processed, a check is made that a valid claim has been received. Where a claim has been made in writing and is invalid, you should write to the taxpayer giving an explanation of why the claim cannot be accepted, using the SEES letter SA811.Where a claim has been made online and is invalid, it will be automatically rejected and function MAINTAIN SA NOTES automatically updated to record details of the claim and the reason for rejection.

A valid claim is always effective for both payments on account. The adjustment claimed is divided equally between the two payments on account subject to the rules for adjusting payments on account (SAM1110).

Processing of a claim may result in the taxpayer’s SA record becoming overpaid. Any overpayment remains on the taxpayer record unless the taxpayer asks for a repayment to be made. The consequences of amending payments on account (SAM1120) depend on the state of the taxpayer record. Penalties may be charged where fraudulent or negligent claims are made (see EM4660 Penalties).

Where a valid claim has been made in writing or on form SA303, but not on a Tax Return, you should issue letter SA614 (available on SEES in Forms and Letters) to the taxpayer and/or his agent where appropriate. The SA614 letter advises of the interest implications if the payments on account are reduced by too much. The letter can also be used to acknowledge receipt of any claim where there is likely to be a delay before the statement is issued.

Where a valid claim has been made online by way of a Structured Action Request, the payments on account will be adjusted automatically and function SA NOTES automatically updated to record that the adjustment has been made. Where a request to reduce a payment on account is made on a return, SA NOTES will not be updated.

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History of claims

A full history of the payments on account, including the date and reason or origin of each amount held, can be viewed. You can view the history by using the [View History] button in function MAINTAIN PAYMENTS ON ACCOUNT. Function MAINTAIN PAYMENTS ON ACCOUNT is accessed from function VIEW STATEMENT.

Note: The word ‘interims’ is sometimes used to describe the payments on account.

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Structured Action Requests (SAR)

Where a claim to reduce Payments on Account is received by way of a Structured Action Request, an automatic SA Note will be created showing a ‘reason code’. The codes and their corresponding meanings are shown below:

Code Reason for claim
   
1 ‘My business profits are down/my business has ceased’
2 ‘Other Income has gone down’
3 ‘Tax allowances and reliefs have gone up’
4 ‘Tax deducted at source is more than the previous year’