Assessments: assessments within SA: pensions etc taxable on the amount accruing in the year ('accruals basis')
In many cases, the taxable pension income for a tax year is the amount accruing in that year irrespective of when any amount is actually paid. Where the ‘accruals basis’ applies, the pension etc should be assessed on the amounts that the pensioner is entitled to in the tax year.
EIM74101 gives guidance for 2003-04 and later tax years and lists the pensions and annuities that are taxable on the ‘accruals basis’. For details about Social Security income, also taxed on the accruals basis, see EIM76004.
SE74101 onwards gives guidance for 2002-03 and earlier years.
Pensioners are often content to pay income tax on the amount received in a year as, in most years, the amounts accruing and received are similar. However, it is possible in certain circumstances for the amounts to be substantially different, and assessments are required.
If a taxpayer requests the statutory basis this should be accepted.
Assessments should not be raised for years where
- The taxpayer did not make SA returns. For these years the PAYE underpayments should be calculated and net underpayment at the end of the last non-SA year should be recorded on the SA record using function CREATE SUNDRY CHARGE (Net Underpayment)
- The time limit for taxpayer amendments has not expired. For these years treat the amount accruing as a taxpayer amendment
|1.||The assessments should not be made until the SA return for the year in which the payment was made has been received. It is important that you record the PAYE underpayment and / or taxpayer amendment for earlier years on the SA system first, to ensure that any overpayment for the latest year is not repaid, where it needs to be set against these earlier years|
|2.||If you are notified of the payment by the pension provider, before the return is received, you should set the No Repayment signal on the SA record, to prevent a repayment being issued automatically when the return is captured|
|3.||The relevant due date for Section 101, FA2009 and Schedule 53 from 31 October 2011 (Section 86 up to 30 October 2011) interest purposes will be the statutory dates for the year of assessment. However, see Note 4 below|
|4.||Any available credit from the PAYE tax deducted in the year when the pension was received should be transferred to OAS to be allocated back to the SA record with an effective date of payment (EDP) equal to the relevant dates|
|5.||Where pension payments have been reallocated to the respective years, if the resulting tax paid for the year (when the payment was made) now exceeds the reduced payment figure, you should calculate the liability manually and enter it on the taxpayers record using function CREATE RETURN CHARGE|