Client Payment Advice - Easy Urgent Question !

System
System Posts: 100,534 🤖 Admin 🤖
edited 12:08PM in AAT member discussion
Can someone advise me, to advise someone else please:

Tax Liability for 2003/04 = £1,361.65
Client Payment advice:
31/01/05 payment = £680.82
31/07/05 payment = 680.83

Tax Liability for 2004/05 = £1000.20
Client Payment advice:
31/01/06 payment = £138.65 =(£500.10-£361.45)
31/07/06 payment = £500.10

Tax Liability for 2005/06 = £1229.92
Client payment advice:
31/01/07 ?
31/07/07 ?

If they had paid £1000.20 for 2004/05 it would be 2 x payments of £614.96. Can someone advise what the adjustment / final installment should be for 2005/06 ?

Thanks for any advice

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Client Payment Advice - Easy Urgent Question !

    Following on from your logic, the answer should be:

    Tax Liability for 2005/06 = £1229.92
    Client payment advice:
    31/01/07 payment = £844.68 (£614.96 + £229.72)
    31/07/07 payment = £614.96


  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Client Payment Advice - Easy Urgent Question !

    Thank you Dean - thats what i have, but I'm not sure why ? is that correct / the way it should be done ?

    The 1st 2 returns were done by a chartered accountant, the 3rd by me. I dont understand why he has reduced 2004/05 tax liability by the additional amount of tax paid in 2003/04 :?

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Client Payment Advice - Easy Urgent Question !

    It's because the payments on account exceeded the eventual tax liability.

    If the Tax Return had been completed a bit earlier then the client would have claimed a refund rather than set it off against the first POA for the following year.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Client Payment Advice - Easy Urgent Question !

    Hi, just to add what i think should be

    Tax paid inadvance for 2005/6 £638.75 (£138.65+£500.10)

    Actual Liability 2005/6 £1229.92
    therefore underpayment of £591.17 (1229.92 - 638.75)

    I have it as 1st paymt £1206.13 (614.96+591.17)
    2nd £614.96

    what you have now paid is for 2006/7 return in advance.
    you can check this on the hmrc website, abit of reading :lol:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Client Payment Advice - Easy Urgent Question !

    thanks for your input folks - i think he owes his 05/06 tax liability £1,229.92 + £229.72 for his underpayment of previous yrs tax.

    but 1 of those 2 options for definite :roll:

    i will be visiting my chartered friend for some more free advice
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Client Payment Advice - Easy Urgent Question !

    I agree with you Dean.

    Tim the client hasn't underpaid tax, all that has appeared to have happened is (like Dean has already said) the client has overpaid one of his payments on account in a prior year. The Revenue are therefore giving him relief for it. His payment on account for 31.01.06 will still be taken as £500.10
    Following on from your logic, the answer should be:

    Tax Liability for 2005/06 = £1229.92
    Client payment advice:
    31/01/07 payment = £844.68 (£614.96 + £229.72)
    31/07/07 payment = £614.96

    That is clear but to try and expand further...

    Liability for 2004/05 = £1,000.20
    First payment on account of 2005/06 = £500.10 31.01.06
    Second payment on account of 2005/06 = £500.10 31.07.06
    Actual 2005/06 liability = £1,229.92

    Therefore:
    Actual 2005/06 liability = £1,229.92
    Less payments on account =(£1,000.20)
    Balancing payment due = £229.72
    plus first payment on account of 2006/04 614.96 (1,229.92 / 2)
    Total payable by 31.01.07 = £844.68
    Second payment on account in 31.07.07 = £614.96

    Hope that has helped.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Client Payment Advice - Easy Urgent Question !

    I think the key here is to consider the dates

    At the end of the tax year you pay your tax liability - presumably 03/04 tax paid in full

    Payment on account is payment in advance for 04/05 based on 03/04 liability

    Resulting in an overpayment of final tax bill 04/05 (cycle continues)

    Therefore I agree with Deans figures

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Client Payment Advice - Easy Urgent Question !

    thank you again - just to confirm, Dean & Dean & Millie were correct. Thanks Dean Shep 1st'ly & Dean for expanding it a bit - it is v clear now

    He had overpaid in 1st year hence the reduction in 2nd year & so (as per my 1st thought) - there was no outstanding balance & so only owed 200506 liability + diff between 0405 & 0506 assessments.

    :thumbup:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Client Payment Advice - Easy Urgent Question !

    You're welcome.

    Regards

    Dean

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