PTC Dec 06

Liliana

Hi there
I am trying to do the above paper and i am stuck in question 1.4, is asking me to calculate the payments on account for the tax year 2006/2007.
Could anyone explain me how do i work this out?
Many thanks
:001_smile:

anastasia

Hi Liliana.
I'll just give you a quote from past papers answers. Sorry don't have time to look into your particular question, but hope this will help you a little bit.

Question.
Email from client. Subject: Advice
I am writing for some clarification on my father’s tax affairs.
As you know from his file, my father is no longer capable of handling his own affairs and there is a letter
signed by him authorising me to deal with all of his tax matters.
Yesterday morning, I received, from HMRC, the notification of how much tax he has to pay on
31 January 2008. It says he owes £1,400 from 2006/07, and needs to pay £3,500 for 2007/08. I thought
he had paid all the tax due for 2006/07, so I don’t understand what the £1,400 is for. Also, I know that he
has hardly any income this tax year, so where does the £3,500 come from?
If you could explain this to me, I would be very grateful. Could you please keep it as simple as possible,
so that I can then explain it to my father.
Regards,
Antonia

Answer.
Re: Advice

Antonia, I am more than happy to respond to your query. Firstly, let me explain how HMRC collects income tax from taxpayers.
Half of the tax liability for any year is paid by 31 January in that tax year, and the other half is pad by 31 July following the tax year. This is based on an estimate, using the preceding tax year’s liability.
Therefore, when your father paid his tax liability on 31 January 2007 and 31 July 2007 for 2006/07, this was based on his liability for 2005/06.
When the final figures were sent to HMRC, they have worked out that these two instalments are not enough to cover the full liability, hence the £1,400 is the balance of tax due.As explained, the instalment on 31 January 2008 for this current tax year is based on the accurate liability for 2006/07. If he overpays for 2007/08, he will receive a refund from HMRC.
However, he can claim to reduce these instalments if he knows that his income will not be as high as it was last year. Whilst this is fine, your father needs to be careful. If he makes an incorrect claim to reduce these instalments, then HMRC will charge him interest on the difference between what should have been paid and what was actually paid.
I hope this fully answers your queries, but please do not hesitate to contact me again if necessary.
AAT Student


Good luck on exams!!!