Are there penalties and interest charges for incorrectly assessing SA Payments on Account?
Client has triggered higher rate tax due to high dividends, which in turn has generated payments on account 2016/17. However the dividends will not be repeated, so POA could be removed.
However, the new income streams are indicating that tax on the 2016/17 SA will be payable - and possibly more than the POA calculation.
If I remove the POA, and it turns out it was reasonably accurate, albeit on a different income stream, what are the consequences, other than paying the tax when due?
Replies (4)
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From what you say any application to reduce payments on account would be misconceived, as the basic pre-requisite for doing so - that next year's tax liability is expected to be less than this year's - does not apply. Whether any consequences would follow from that - apart from interest on the underpayment - is a moot point. Probably unlikely.
You could be penalized with this according to the letter of the law, but I have never seen this done in practice
POAs are a global thing and you can't pigeon hole one source or another.
You'll definitely be charged interest and, in the unlikely event of HMRC raising a penalty (I've never come across this), you may have difficulty defending it bearing in mind that you seem fully aware that the tax will be due.