Author: admin

The expected liability under Self-Assessment (SA) is calculated based on statutory guidance outlined in Section 59A and Section 59B of the Taxes Management Act 1970, as referenced in your document.

Here’s how it works:

1. Starting point – prior year’s liability
   HMRC calculates your expected liability for the current tax year using your previous year’s total income tax and Class 4 NIC liability, less any tax already deducted at source (for example, PAYE or CIS).
2. Payments on account
   1. You are normally required to make two payments on account, each equal to 50% of the previous year’s net liability.
   1. These are due:
      1. 31 January during the tax year, and
      1. 31 July after the tax year ends.
         These advance payments are meant to cover your “expected” liability for the ongoing year.
3. Adjustments and balancing payment
   1. Once your Self Assessment tax return is filed, HMRC calculates the actual liability for the year.
   1. The difference between the actual amount owed and what has already been paid on account becomes your balancing payment, due by 31 January following the end of the tax year (Section 59B (1) – (4)).
4. Reductions or claims
   1. You may make a claim to reduce your payments on account under Section 59A(3) and (4) if you reasonably expect your current year’s income to be lower.
   1. However, excessive reductions made negligently or fraudulently can attract penalties under Section 59A(6).

So in summary:

Expected SA liability = 100% of the prior year’s net income tax and Class 4 NIC liability (excluding tax deducted at source), paid as two equal instalments on 31 January and 31 July.
Any remaining balance is paid the following 31 January once the actual figures are known.

Partnership appeals have specific procedures that differ significantly from individual appeals. Here’s how HMRC handles them:

Who Can Make Partnership Appeals

Strict Authority Requirements:

• Must be made by the nominated partner on behalf of all relevant partners
• OR by an authorized agent acting for the partnership/nominated partner
• Appeals from non-nominated partners will be refused
• Tribunals may reject appeals not made by the nominated partner

Verification Process: If it’s unclear who the nominated partner is, HMRC will:

• Issue SEES form SA670 to confirm the nominated partner’s name
• Make a Free Format Note on the Partnership record noting either:
  • “DD/MM/YY SA670 received. Nominated partner is [name]”
  • “YY/YY box 11.3 shows nominated partner as [name]”

Alternative Acceptance: Appeals can be accepted from:

• Partner shown in box 11.3 on internet-filed returns (current or previous year)
• Person who signed the paper return (if box 11.3 is empty)
• Agent acting for all partners (though verification may be needed for large partnerships)

Special Circumstances

Death of Nominated Partner:

• Successor is generally the person nominated by majority of other partners
• Must include personal representative of deceased partner in the majority
• SEES form SA670 must be issued to confirm new nominated partner

Agent Representation:

• Can accept from agent acting for all partners
• For large partnerships (hundreds of partners), practical verification may not be possible
• Issue SA670 to confirm nominated partner details

System Recording Process

Unique Aspects for Partnerships:

1. Record Location:
   • Appeal recorded only on partnership record
   • Do NOT record on individual partner records
   • Use penalty imposition date as charge creation date (may need to check partner records to find this)
2. Standover Procedures:
   • Informal standover penalty in full on each individual partner’s record
   • Note work list items: “Working with Partnership, responsible office and UTR”
   • Not necessary to record appeal on individual partner records
3. Cross-Reference Management:
   • Partner records should note any work list items
   • Include reference to partnership responsible office
   • Maintain clear audit trail between partnership and individual records

Settlement Process

When Appeal is Settled:

1. Update Individual Records:
   • Where possible, update each individual partner’s record
   • Reduce standovers to nil
   • If direct updating not possible, inform responsible office for each partner
2. Tribunal Considerations:
   • Ensure tribunal understands they’re considering penalties on all partner records
   • Provide clear documentation of all affected partners
3. Communication:
   • Notify all relevant offices of settlement outcome
   • Ensure consistent treatment across all partner records

Penalty Application Rules

Late Filing Penalties:

• All partners charged if partnership return not filed by due date
• Appeals must go through nominated partner
• Try to settle immediately if possible

Processing Approach:

• Handle through partnership record using nominated partner authority
• Apply informal standovers to individual partner penalties
• Maintain coordination between partnership and individual records

Administrative Notes

Work List Management:

• Appeals appear on partnership work list
• Individual partner standovers noted separately
• Cross-referencing essential for tracking

Documentation:

• Retain clear records of nominated partner status
• Document any changes in partnership composition
• Maintain audit trail for tribunal purposes

Quality Control:

• Regular review to ensure all partner records updated
• Coordinate between multiple responsible offices if needed
• Monitor for prompt settlement across all affected records

This partnership-specific process ensures that while the appeal is centrally managed through the nominated partner, the practical effects (like standovers) are properly applied to all affected individual partner records, maintaining both legal compliance and administrative efficiency.

A reasonable appeal typically involves either factual grounds or reasonable excuse. Here’s what counts:

Valid Grounds for Appeal

Factual Appeals

• The assessment, penalty, or charge is factually incorrect
• The return was actually filed on time
• Payment was made on time
• An agreed Time to Pay arrangement was already in place

Reasonable Excuse Appeals

A reasonable excuse is something that prevented the taxpayer from meeting their obligation despite taking reasonable care. It must be based on circumstances outside their control.

What HMRC Typically Accepts as Reasonable Excuse

Health-Related

• Serious illness preventing the taxpayer from filing/paying
• Mental health conditions (like PTSD) that impacted decision-making ability
• Hospitalization that prevented dealing with tax affairs
• Death of spouse/close relative that significantly impacted ability to meet obligations

External Circumstances

• COVID-19 pandemic impacts (widely accepted during the relevant period)
• Fire, flood, or theft that destroyed records or prevented filing
• Postal service disruption (with certificate of posting showing timely dispatch)
• HMRC online service failures with error messages as evidence

Technical Issues

• Computer/software failure just before filing deadline
• Delayed HMRC activation codes (if requested before deadline)
• Loss of tax records through circumstances beyond control

What HMRC Does NOT Accept

Explicitly Excluded by Law

• Shortage of funds (unless due to events completely outside taxpayer’s control)
• Reliance on another person (unless specific conditions met)

Commonly Rejected Reasons

• Pressure of work
• Tax return being “too difficult”
• Failure by tax agent
• Lack of information from third parties
• Not knowing how much tax to pay
• Absence of HMRC reminders
• Cheque made out incorrectly
• Lack of free HMRC software

Key Requirements

1. Timing: Appeals must be made within 30 days of the notice (37 days allowed for processing)
2. Writing: Should be in writing, though some telephone appeals accepted
3. Authority: Must be made by the taxpayer, authorized agent, or (for partnerships) the nominated partner
4. Prompt Action: Once the reasonable excuse ends, taxpayer must act without unreasonable delay (typically within 14 days)

Special Considerations

• Each case is assessed on its individual facts and circumstances
• What’s reasonable for one person may not be for another based on their abilities
• HMRC considers the taxpayer’s overall ability to manage their affairs during the period
• Disability may be relevant if it specifically prevented compliance, but existing disabilities require contingency planning

The key test is whether the circumstances genuinely prevented the taxpayer from meeting their obligations despite taking reasonable care, and whether they acted promptly once the excuse ended.

HMRC’s self-assessment infrastructure is governed by several key pieces of legislation:

Primary Legislation

Income and Corporation Taxes Act 1988 (ICTA 1988) – Contains numerous provisions including:

• Relief calculations for trading losses, farming profits, and personal pensions
• Post-cessation receipts and literary/artistic profits spreading
• Relief for losses on unquoted shares

Finance Act 1994 Chapter III – Establishes the foundational self-assessment framework:

• Personal and trustee returns (Section 178)
• Self-assessment requirements (Section 179)
• Partnership returns and assessments (Sections 184-185)

Taxes Management Act 1970 (TMA 1970) – Provides the administrative backbone:

• Revenue Determinations (Section 28C)
• Recovery powers for fraud/negligence (Section 29)
• Error relief provisions (Section 33)
• Payment on account rules (Section 59A)
• Balancing payment calculations (Section 59B)
• Penalty and surcharge provisions (Sections 59C, 93, 93A)
• Interest calculations (Section 86)

Taxation of Chargeable Gains Act 1992 (TCGA 1992) – Covers capital gains aspects including loss carry-back provisions

Supporting Legislation

Finance Acts 2008 & 2009 – Modern updates including:

• HMRC set-off powers (FA 2008)
• Updated interest calculation rules from 2011 onwards (FA 2009)

The Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682) – Governs PAYE interactions with self-assessment

This legislative framework creates a comprehensive system covering filing obligations, payment schedules, penalties, interest calculations, and HMRC’s administrative powers for self-assessment.