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HMRC internal manual

Self Assessment Manual

From
HM Revenue & Customs
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Records: set up taxpayer record: when to set up an individual SA record

This subject covers the circumstances in which you will need to set up an individual SA record type. See also the subject ‘When To Set Up A Trust SA Record’ (SAM100320).

An SA individual record type is appropriate for any individual, including a partner in a partnership, for whom an SA record is required. Follow the Action Guide ‘Set Up Individual Record’ (SAM100221) to set up the record. It is also appropriate in the following situations.

Undesignated clients’ deposit accounts

Interest received on an undesignated clients’ deposit account may be paid to the client, by the solicitor, either gross or net of tax. Where tax has been retained, the solicitor usually sends a letter to his or her office with responsibility for processing work showing the total gross interest and tax deducted for the year together with a cheque to account for the retained tax. The liability should be dealt with by Special Assessment, see subject ‘Non- SA assessing (SAM22001 onwards).

This liability must not be dealt with from the solicitor’s personal SA record.

Previous instructions told you to deal with the retained tax by opening an individual SA record in the solicitor’s name. This is incorrect. When you come across such an SA record

  • Make it dormant following the Action Guide entitled ‘Dormant Records: making a record dormant’ (SAM101092)
  • Write to the solicitor to explain how the retained tax is being dealt with

Non-resident company liable to Income Tax

A non-resident company may

  • Trade in the UK through a permanent establishment and make CT returns, but be liable to Income Tax on non-trading income

Or

  • Not trade in the UK through a permanent establishment and therefore not make CT returns, but be liable to Income Tax on non-trading income. (If unusually, it trades other than through a permanent establishment in the UK and there is no exemption from UK tax under a double taxation agreement, it also remains liable to income tax on income from that trade)

In both cases an individual SA record is required but otherwise the treatment differs as below.

Trading in the UK through a permanent establishment

A non-resident company carrying on a trade in the United Kingdom through a permanent establishment is chargeable to Income Tax, at basic rate only, on non-trading income that is not attributable to the permanent establishment. (Note that interest, patent royalties or licence fees connected to the operations of the permanent establishment will be chargeable to CT along with the purely trade income.)

Such income will be included on the CT return. The office with responsibility for technical work that is responsible for the COTAX record will ask the SA office responsible for processing work to set up an SA record for the company. An individual SA record is required. Before setting up the record you should ensure that you have been advised of full details, including for example

  • Any capacity details
  • Agent details
  • The company accounting date

Follow the Action Guide ‘Set Up Individual Record’ (SAM100221) to set up the record.

COTAX will advise you of the liability to Income Tax each year. On receipt of details, you should

  • Use function LOG RETURN to log the date of receipt as the earlier of 

    • The date that the CT return was issued
    • 31 January following the end of the SA year
  • Use function CREATE RETURN CHARGE to enter the charge on the SA record. This will cause payments on account for the following year to be set up on the record
  • Use function AMEND TAXPAYER SIGNALS to set the Manual Return signal. An SA return is not required

Not trading in the UK through a permanent establishment

A non-resident company not carrying on a trade in the United Kingdom through a permanent establishment may receive non-trading income through a UK agent and be chargeable to Income Tax on that non-trading income. It may also be chargeable to income tax on profits from a trade carried on in the UK other than through a permanent establishment. If so, the limit of liability to basic rate income tax does not apply to the tax on that income.

Follow the Action Guide ‘Set Up Individual Record’ to set up the record. Set the Manual Return signal in function AMEND TAXPAYER SIGNALS. Return form SA700 (obtainable from CPU) is issued manually. Function RECORD DATE OF CLERICAL ISSUE is available to record the issue.

On receipt, the return is logged in the usual way. Capture of the self calculation, or clerical calculation, is by use of function CREATE RETURN CHARGE, which will set up payments on account for the following year.

Non-resident landlords

Non-resident landlords, whose UK tax affairs are up to date can apply to PT International, Liverpool to receive UK rental income with no tax deducted.

Where no application is made, or an application is refused, the letting agent (or tenant where there is no letting agent) must deduct basic rate tax from the net rent after any allowable expenses incurred by the agent / tenant.

An individual not resident in the United Kingdom can still be liable to tax on income arising in the UK. This is a matter of fact. A non-resident landlord liable to UK tax on rent received gross must self assess. The continuing approval for receipt of rental income with no tax deduction is dependent upon the landlord continuing to meet his or her UK tax obligations.

PT International is not responsible for dealing with a non-resident landlord in the following circumstances. The processing office can deal with these cases

  • Where the landlord is working abroad but remains Resident / Ordinarily Resident in the UK and qualifies for the 100 per cent deduction
  • For the year of departure when a landlord ceases to be UK resident. PT International (or PD) will assume responsibility for the year following the year of departure
  • For the year of arrival when a landlord becomes resident in the UK

Where there is no SA record, you will need to set up an individual SA record. Follow the Action Guide ‘Set Up Individual Record’ (SAM100221) to set up the record.

Where liability arises on income from property under these circumstances, a taxpayer emigrating will not be entitled to a permanent cessation repayment under the procedures contained in section ‘Permanent Cessation’ (SAM90000). However, the taxpayer may be entitled to a provisional repayment under existing procedures.

Where there is a current employment record, or an employment record that has been live during the current year, PT International will issue notification that rent is to be paid gross, on form NRL11.

Unsolicited returns

Unsolicited returns are returns received from taxpayers (or their agents) who have not been required, by the official issue of a return containing a Section 8 / 8A notice, to file a return.

Where you receive an unsolicited return, you should in all cases refer to the guidance at subject ‘Unsolicited Returns: Individuals’ (SAM121140).