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Self Assessment Manual

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HM Revenue & Customs
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Compliance: enquiry work: S9A: contract settlement (Action Guide)

When you have finished your enquiries into an individual’s, pension scheme’s or trust’s return and a contract settlement (SAM31060) has been made with the taxpayer follow the instructions in the Enquiry Manual and steps 1 - 19 below. This Action Guide supplements the Enquiry Manual by telling you what SA and CQI Workbench functions to use on concluding the enquiry.

Additionally, where the enquiry record was set up using CQI Workbench function CREATE ITSA DISCOVERY, refer to the Action Guide ‘Concluding an enquiry: Using ITSA Discovery records’ (SAM31046).

The guide is presented as follows

  Steps 1 - 2
   
  Step 3
  Steps 4 - 9
  Steps 10 - 11
  Steps 12 - 17
  Steps 18 - 19

For details of how to access any of the SA functions, select ‘Index of Functions’ on the left of the screen.

Surcharge

1. If surcharge has been imposed on duties all of which are subject to tax geared penalties, then provided the surcharge is unpaid
   
  * Use function MAINTAIN SURCHARGE to cancel it
  Note: If the surcharge is already paid do not cancel it. But, give credit for the payment in the contract settlement. Likewise, give credit for any interest charged on the surcharge which has been paid
2. If surcharge has been imposed on duties of which only part are subject to tax geared penalties, then provided the surcharge is unpaid
  * Use function MAINTAIN SURCHARGE to cancel all of the surcharge
  And
  * Include in the contract settlement that part of the surcharge that relates to non-culpable duties (and culpable duties on which tax geared penalties are not imposed). For example, surcharge of £600 is unpaid of which £400 relates to duties on which tax geared penalties are imposed. Include £200 surcharge as part of the liabilities in the contract settlement
  Note: If the surcharge is already paid do not cancel it. But, give credit in the contract settlement to the extent that it relates to paid surcharge on duties which are subject to tax geared penalties. Using the above example, credit of £400 would be given in the contract settlement

Recording additional Student Loan repayments

  If any additional Student Loan repayments are included in the contract settlement, the additional amounts must be recorded on the SA record to make sure that the correct amount is notified to the Student Loans Company
   
3. Use function CREATE RETURN CHARGE FOR ENQUIRY (for each applicable year) to add the amount of additional Student Loan repayment to the existing entries in
  * The Student Loan Repayment field
  And
  * The Overpayments for earlier years field
  Note: This will not affect the liability, but the amount in the Student Loan Repayment field will be notified to the Student Loans Company (replacing any amount already notified to them)

Payments on account for post enquiry year

  Examples are available at SAM31090 
   
  If one of the following applies, additional interest attributable to payments on account for the post enquiry year is not included in the contract settlement.
  * The due date for the contract is before the balancing payment due date for the final year of the enquiry
  * The return for the post enquiry year has not been received
  * The taxpayer does not agree to this interest being included in the contract
  In these cases, when the contract has been accepted (but before entering the settlement date)
4. Print the statement(s) showing the details for the final year of the enquiry and the post enquiry year, to refer to in the steps below
5. Check the current view of function VIEW STATEMENT to see if there is an unallocated credit on the taxpayer’s record. You must use function TRANSFER FROM OVERPAID BALANCE to transfer the whole of the unallocated credit to OAS. For more information, refer to the Debt Management and Banking Manual
6. Amend the return for the final year of the enquiry using function AMEND RETURN FOR ENQUIRY or use function CREATE RETURN CHARGE FOR ENQUIRY for the final enquiry year to add the total of the agreed additional income tax and Class 4 NIC for that year 
  * To the existing entry in the Income tax due after reliefs field (using the Revenue amendment type)
  Use function CREATE INFORMAL DISCHARGE to discharge the unpaid debits on the SA record for the final year of the enquiry, which have been included in the contract settlement. The charges available for informal discharge will be shown automatically on the screen when you enter the function. If any of these debits have been informally stoodover use of this function will automatically clear the standovers
  ### Example
  The facts of the case are as follows
  * Payments on account for 2002-03 of £500 each are paid by the due dates
  * SA return for 2002-03 received 01/09/2003 shows income tax liability of £200. As liability is less than payments on account the computer reduces them to £100 each, resulting in an overpayment of £400 on each payment on account
  * S9A enquiry opened on 05/09/2003 and £800 overpayment not repaid
  * Agreed liability for 2002-03 is £4000 (income tax £3500, Class 4 NIC £500)
  * Contract settlement accepted on 04/03/2004 for additional liability of £3800 of which £800 is treated as paid on account
  At 04/03/2004 the position for 2002-03 on the SA record is as 2 above. The computer has not set up payments on account for 2003-04 as liability originally returned for 2002-03 (£200) is less than £500. To set up the payments on account for 2003-04 amend the return for 2002-03 using function AMEND RETURN FOR ENQUIRY or access function CREATE RETURN CHARGE FOR ENQUIRY and enter the amendments as shown in the Table below.
Field Original Amended
     
Income tax due after reliefs £200.00 £4000.00
  The computer uses the revised total of Income tax due after reliefs figure of £4000.00 to set up payments on account for 2003-04 of £2000 each.
   
  The contract settlement shows additional liability of £3800, of which £800 is already paid and held on the SA record, leaving a balance of £3000 to be collected in the contract settlement.
  Use function CREATE INFORMAL DISCHARGE to discharge the £3000 increased charge which is being recovered by contract settlement so that it does not appear also on the SA record for 2002-03.
  Note 1: By using the CREATE INFORMAL DISCHARGE function there will be no effect on the overall return charge for the final enquiry year. But, the computer uses the revised income tax and Class 4 NIC totals to set up or amend existing payments on account for the post enquiry year
  Note 2: If a claim to adjust payments on account has already been recorded for this following year, there is unlikely to be any change to the amounts displayed in function VIEW STATEMENT. These amounts are the Taxpayer amounts, resulting from the taxpayer’s claim. To view the revised Revenue amounts you would need to use function MAINTAIN PAYMENTS ON ACCOUNT
7. If any payments previously allocated to the balancing charge for the post enquiry year have been reallocated automatically as a result of the amendment in step 6 above, you must reallocate these payment(s) to the increased payments on account for the same year. This is to avoid an incorrect surcharge being imposed for the post enquiry year
  This must be done on the same day as the amendment in step 6. Use ‘Target’ in function CLERICAL REALLOCATION to reallocate these payments. For more information see the Debt management & banking Manual. The payment(s) must retain the same effective date of payment (EDP)
8. Where step 5 above applies, arrange for any amount transferred to OAS to be reallocated. The amount(s) transferred must be given the effective date of payment (EDP) applicable before they were transferred to OAS. Depending on the circumstances of the case, these payments may need to be reallocated back to the SA record or to the contract settlement
9. Write to the taxpayer and agent to explain
  * Payments on account have been updated for the post enquiry year based on the agreed liability for the final enquiry year. Stress that the statutory due dates of the payments on account remain the same
  * A statement will be issued shortly showing the payments on account for the post enquiry year. In some cases the statutory due date of the first (and second) payment on account will have passed. If so, the taxpayer should in advance of receipt of the statement be invited to send in payment. This will stop interest accruing on the payments on account.

Informally discharging liabilities included in the contract settlement

10. Use function CREATE INFORMAL DISCHARGE to discharge any other liabilities heldover on the SA record which were included in the contract settlement such as a fixed penalty, all or part of a charge relating to a Revenue assessment, all or part of an interest charge
   
11. Use function MAINTAIN APPEAL to close any open appeal on released liability

Update SA and CQI records

12. Use function MAINTAIN COMPLIANCE SIGNALS to check and, as necessary, add, amend or delete
   
  * Compliance notes
  * Third party information
  * Complex PAYE Case or Construction Industry signals
  Note: It is important to keep compliance details up to date as they are used in automatic and manual risk assessment. For more information see subject ‘Compliance Signals’ (SAM32020)
13. Use function ADD / AMEND ANNUAL COMPLIANCE DETAILS to enter or update the following for the post enquiry year
  * Mandatory Review for Possible Enquiry signal
  * Potential Selection for Enquiry Priority signal
  * Review Notes
  Note: As return details are not always updated in contract settlement cases, automatic risk assessment for the post enquiry year may give a false result (on comparing return details for the post enquiry year with the final enquiry year). Function AMEND RETURN FOR ENQUIRY updates the return figures but function CREATE RETURN CHARGE FOR ENQUIRY does not. It is important to review and, if appropriate, set the above signals to ensure the return for the post enquiry year is reviewed for possible enquiry. For more information about these signals see the subject ‘Compliance Signals’
14. Use the following CQI Workbench functions, where appropriate, to record details of the enquiry
  * RISKS AND ADJUSTMENTS. Adjustment(s) must be recorded, except for Class A settlements. Details of Adjustments achieved are passed to InfoNet to provide management information. It is also used to determine the success of projects and future intervention strategies
  * QMS. The QMS Questionnaires must be completed if the In Progress QMS field has been checked in function ENQUIRY DETAILS
  * SETTLEMENT DETAILS. The details needed in this function will depend on the settlement class
  Note: The settlement class recorded on the CQI Workbench determines the information you need to enter in function SETTLEMENT DETAILS.
  The settlement classes are
  * A - No change to the return figure as a result of the enquiry
  * B - Change to the return figures for one or more years as a result of the enquiry, but no additional yield. No penalty
  * C - Change to the return figures for one or more years as a result of the enquiry, resulting in additional yield. No penalty
  * 1 - Class 1A settlement (as defined in EM0100)
  * 2 - Class 2 settlement (as defined in EM0100)
  * 3 - Transferred to Special Compliance Office (SCO)
15. Use CQI Workbench function ENQUIRY DETAILS for the enquiry year to
  * Enter the settlement date
  And, as necessary
  * Update other fields
  When the settlement date has been entered on the record, the case is removed from the Open Enquiries List and is placed on the Settled Enquiries List.
  Note: The Settled Enquiries List only displays cases which have been settled in the current reporting year.
  You do not enter a closure date in contract settlement cases. The settlement date is passed overnight from the CQI Workbench to the SA record. The following day, you should check in function VIEW COMPLIANCE HISTORY that this has been done, then continue with steps 16 - 17 below
16. Use function AMEND TAXPAYER SIGNALS to enter ‘Y’ in the No Repayment field if the contract settlement is unpaid or some other reason exists for inhibiting automatic repayment. The entry in this field is changed from ‘Y’ to ‘N’ when the settlement date is passed from the CQI Workbench to the SA record (unless there is another open enquiry on the taxpayer)
  Note: The No Repayment signal should remain set to ‘Y’ until all of the liability in the contract settlement is paid
17. Use function MAINTAIN RESPONSIBLE OFFICE to set the Automatic Move (SAM31070) status to ‘N’ if some other reason exists for inhibiting automatic transfer of your responsibility for the taxpayer during a bulk transfer of SA records
  Note: The entry in this field is changed from ‘N’ to ‘Y’ when the settlement date is passed from the CQI Workbench to the SA record unless there is another open enquiry on the taxpayer

Summarising the enquiry and noting the SA record

18. If the enquiry involved a challenge to the original status claimed, even if the challenge was not the main part of the enquiry and if that outcome is unchanged from that returned by the taxpayer, use Function VIEW TAXPAYER DESIGNATORY DETAILS and the [Residency] button to enter ‘Y’ in the Residence box to indicate UK resident or ‘N’ to indicate non UK resident. The ‘Date Domicile Set’ field should record when the UK Domicile decision was made
   
19. Use function MAINTAIN SA NOTES to record where the enquiry papers are filed