RECOGNITION POINT FOR ALL TAX AND DUTY HEADS TAX OR DUTY BRIEF DETAILS RECOGNITION POINT HEAD Income Tax The two main components of personal income tax are PAYE (including PAYE paid by higher rate employees) and self assessed income tax (self employed and balance of higher rate employees). Student loan recoveries are also collected via PAYE. PAYE income tax (and income tax relating to higher paid employees Income tax collected at source is paid over otherwise covered by the self by employers to the Inland Revenue by the assessment system) collected, and 19th of the month following the month of amounts due to or from employers, collection from the employee for non for the tax year just ended will be electronic payments and 22nd of the month available in the October following the following the month of collection for end of the tax year – in time for the approved electronic payment methods. financial year with which the fiscal Final, annual returns are due to HMRC by year is (almost) coterminous. PAYE 19th May (22nd May for electronic income tax is accounted for on an payments), after which time employers will accruals basis. issue P60s to employees. HMRC carries out a reconciliation exercise in October and Self-assessed income tax (for those identifies any amounts due to or from the who pay by instalments) will be employer in respect of PAYE income tax for deemed to accrue evenly over the tax the year. year in which the relevant accounting period ends. The accrual will be based on the two payments on Details of the self assessed income tax for account (received in the January in the higher rate employee, and therefore the the tax year and the July following it), amount due to or from the taxpayer, will not with a statistical estimation of the be available until approximately one year balancing payment, net of after the tax year to which the tax return repayments, due in the January of the relates. year following the end of the tax year. The self-employed pay income tax in Tax deducted from savings income instalments based on their self assessed will be deemed to accrue evenly over liability for the previous year. the quarter for which the tax is due. For any quarter straddling the WGA Tax deducted from savings income by financial year-end, the appropriate banks and building societies is due quarterly proportion of duty will be accounted in respect of interest credited to depositors’ for in that year. accounts in the previous quarter. The due date is normally the 15th day of the month Company income tax will be deemed following the end of the quarter – for banks, to accrue evenly over the quarter to calendar quarterly. Building societies’ which the tax relates. Amounts due quarters end in November, February, May for the quarter ending March will be and August. accrued in the financial year, Page 1 of 16 TAX OR DUTY BRIEF DETAILS RECOGNITION POINT HEAD Company income tax is deducted by companies and other paying agents on distributions other than dividends. The tax is on the 15th day of the month following the end of the calendar quarter. Income Tax Most income tax repayments are made A provision will be made for (Repayment) following a claim. The timing and frequency repayments of income tax (other than of these claims vary according to the type of self assessed income tax – netted off repayment. Repayments on tax relief for self assessed income tax as part of contributions to personal pensions and the the statistical estimation) that will be investment income on PEPs are generally made in years subsequent to the made monthly. financial year. For self assessed income tax, repayments will be accounted for when the payment is made i.e. on a cash basis. Other categories of income tax not specifically mentioned (for example, Investigation settlements and Foreign and Colonial) will be accounted for on a cash basis. Any changes in the tax rate will be partly reflected in the financial year in which the change takes effect (PAYE element). The impact of any tax rate change on any final payment/repayment will not be reflected until the financial year after the year in which the change takes effect. Tax Credits Child Tax Credit (CTC) provides income Tax credits are recognised in the tax related support for children. year in which they are authorised. Working Tax Credit (WTC) provides support Authorisation is the point at which the to people on low incomes including a obligation to pay the tax credit rises. childcare element, if applicable. Child Tax Credit and Working Tax Credit payments are provisional until entitlement is finalised after the financial year-end by the Department’s renewals process. Any resultant underpayments are paid as lump sums, any overpayments recovered from future tax credit awards or through a repayment agreement. Page 2 of 16 TAX OR DUTY BRIEF DETAILS RECOGNITION POINT HEAD Any under or overpayments still o/s at year- end are shown as debtors or creditors at 31 March. Corporation Tax Corporation Tax is split between CT for the Two policies are required for the larger tax payers and those tax payers recognition of Corporation Tax to regarded as small companies. reflect the two regimes. Larger companies pay by four quarterly Self-assessed Corporation Tax will be instalments of 25 per cent of their estimated deemed to accrue evenly over the tax liability for the year. The first payment is period of the tax return and the due 6 months and 13 days after the start of relevant amounts will be brought into WGA. For example, where a the company’s accounting period, with the th company has a 31 December year fourth payment due on the 14 day of the end, WGA will include CT for the 9 16th month after the start of the accounting months April to December and 3 period. The final tax return is due 12 months months January to March. after the end of the accounting period (two years after the start of the accounting Late payments or repayments period). (including those relating to pre- instalment regimes) will be accounted for when they can be reliably measured. Changes in the tax rate are reflected in the year in which the changes take effect. Corporation Tax Corporation Tax for small companies is due Corporation Tax outside the 9 months and 1 day after the end of the instalment regime will be accounted company’s accounting period, with the return for in the year in which it falls due due to be filed 12 months after the end of the (normally, therefore, on a cash basis). accounting period. Changes in the tax rate are partly reflected in the year following that in which they took effect, and fully reflected two years after. Page 3 of 16 TAX OR DUTY BRIEF DETAILS RECOGNITION POINT HEAD Petroleum Revenue Tax (PRT) applies to oil An estimate is provided for PRT Petroleum Revenue and gas production on the UK Continental accrued revenue receivable at Tax Shelf and is charged on each owner’s share financial year end by taking half the of the profits from each individual oil field Budget 2008 (for example) North Sea rather than by reference to profits showing Oil Model forecast of the overall PRT in company accounts. The current rate of liability for the CPE 30 June 2008 less PRT is 50%. any installment payments made by 31 March 2008 pertaining to that th chargeable period. PRT was abolished on 16 March 1993 for fields given development consent after that This methodology assumes that the date but is still paid by 30 or so companies only amounts outstanding at the year- with interests in fields given development end are in respect of the chargeable consent prior to this date. period ending 30 June 2008, with companies having met their The tax is paid in six monthly installments of obligations in full for the chargeable 12.5% of the amount due in respect of six period ending 31 December 2007 monthly Chargeable Periods ending (CPE) (and all prior CPs) having furnished 30 June and 31 December, followed by a their balancing payment at the end of balancing payment. February 2008. PRT is administered by the Large Business PRT decommissioning costs are Service, Oil and Gas. noted as a contingent liability as they remain uncertain and can be carried back indefinitely. They will be determined by the domestic and international obligations that prevail when abandonment takes place during the next 20 years or so. Capital Gains Tax The vast majority of Capital Gains Tax The taxable event for Capital Gains (CGT) receipts are paid over at the same Tax is the disposal of a chargeable time as the final income tax payment under asset leading to a taxable gain. self-assessment arrangements (i.e. 10 months after the finish of the financial year in which the accounting period ends). Some payments are received outside SA or included in PAYE codes for the following year (i.e. two years after the relevant account period), but these are not material. Page 4 of 16 TAX OR DUTY BRIEF DETAILS RECOGNITION POINT HEAD Inheritance tax Inheritance tax is due to be paid six months Inheritance tax will be recognised in after the month in which death occurs. the financial year in which the initial Probate is not granted until the tax has been assessment is raised. paid. Payments are often made on account before the settlement of the liability, where the final liability may take some time (even Changes in the tax rate will be years) to agree.