The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
Tax is collected in a number of ways. These are:
Payments on account are required where:
Each payment on account is 50% of the previous tax year’s tax liability, less the tax collected at source.
Payments on account do not cover capital gains tax since this is a transactional tax and cannot be assumed to remain at the same level year on year; whereas it is a reasonable assumption that income levels will remain static.
Basically, if over 20% of the trustees’ total tax liability for the year is outstanding and to be collected via Self Assessment (assuming this amount is more than £1,000), then payments on account fall due.
See Example 1.
If the trustees anticipate that the outstanding income tax due for the current tax year will be less than the corresponding amount for the previous tax year, a claim can be filed to reduce the payments on account.
The claim must specify the amounts of the revised payments on account (even if these are nil) as well as the reason for the reduction.
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