2nd Payment on account

2nd Payment on account

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I'm sure this question will have already been asked but I couldn't find it anywhere on the forum.

I have a client who submitted their 19/20 self-assessment, they had a tax liability of £2,000 and had to pay two additional payments on account of £1,000 each. First due 31/1/21 second due 31/7/21. They've paid the original bill plus the first payment on account.

I've submitted, today, their 20/21 self-assessment. 

What would happen in the following scenarios:

20/21 bill is £3,000 and the payments on account are now £1,500 each. Do they:

1. Still owe their original payment on account of £1,000 by 31/7/21 and then (3000+1500-1000-1000) £2,500 by 31/1/22; or

2. Is this now overwritten to as (3000+1500-1000) £3,500 due 31/1/22.

Thank you, for any clarity on this.

 

Replies (10)

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Kitten
By Hazel Accounts
04th Jun 2021 11:31

payments on account don't increase (can decrease where less due) so still £1000 due 31/7/21 and balance 31/1/22 + next POA - think that's your option 1. (not really sure I understand your option 2.)

Thanks (1)
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By Not Anonymous
04th Jun 2021 11:53

The POA are calculated by reference to the preceding years return so unless the 2020/21 return showed a liability of less than £2,000 the POA for 2020:21 will remain the same.

So tax payable for 2020/21 is,

31/01/2021 = £1,000
31/07/2021 = £1,000
31/01/2022 = £1,000

The only POA that could be £1,500 are for 2021/22, not 2020/21.

Thanks (1)
RLI
By lionofludesch
04th Jun 2021 11:55

Neither is correct.

You were close with option 2, but the amount due on 31 Jan 2022 is £3000 less £2000 already paid on account plus £1500 payment on account for 2021/22 = £2500.

Not sure why, 25 years on, POAs cause such confusion.

Thanks (2)
Replying to lionofludesch:
By Duggimon
04th Jun 2021 13:10

I think that's actually what they said under option one, although yours was definitely clearer.

Thanks (0)
Replying to Duggimon:
RLI
By lionofludesch
04th Jun 2021 13:59

Quote:

I think that's actually what they said under option one, although yours was definitely clearer.

So clear, I didn't recognise my own answer !!

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By SteveHa
04th Jun 2021 15:08

Anonymous, with clients, and doesn't understand the basics of self-assessment.

Oh dear.

Thanks (2)
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By GHarr497688
04th Jun 2021 20:46

Why are HMRC not adjusting the second payment on account this year when the tax return is filed before 31.7.21. What changes as usually they show 2022 tax payable.

Thanks (0)
Replying to GHarr497688:
RLI
By lionofludesch
04th Jun 2021 20:59

Quote:

Why are HMRC not adjusting the second payment on account this year when the tax return is filed before 31.7.21. What changes as usually they show 2022 tax payable.

Why would a taxpayer file a return early if it meant his payments on account would increase ?

POAs can decrease but never increase.

Thanks (0)
Replying to lionofludesch:
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By GHarr497688
05th Jun 2021 15:43

I am talking about the decrease in payments. Usually if a tax return is filed prior to 31st July the tax return payment reduces once filed. When I look on the portal some are processed and adjusted , others are not showing 2022 , and some are just not processed. All highly confusing and time consuming .

Thanks (0)
Replying to GHarr497688:
RLI
By lionofludesch
05th Jun 2021 16:29

Quote:

I am talking about the decrease in payments. Usually if a tax return is filed prior to 31st July the tax return payment reduces once filed. When I look on the portal some are processed and adjusted , others are not showing 2022 , and some are just not processed. All highly confusing and time consuming .

It's because HMRC are in disarray.

Thanks (1)