219 / 462
GAZETTE
JU
LY/AUGUST
1991
year. However, the taxable income
arrived at cannot be less than 125
100
times the taxable income cal-
culated by the old method.
For example, if my accounting
year ends on the 31st of July of
each year and taxable earnings for:
This transitional arrangement only
applies for business set up prior to
the 6th of April 1989.
Section 17 deals with the new
provisions for Case 3 income i.e.
interest paid without deduction for
D.I.R.T. and foreign income. Pre-
viously this income was taxed on
a preceding year basis i.e. the
taxable income for the year 1989/
1990 would have been the actual
income for the year 1988/1989.
Under the new provisions the tax-
able income for 1990/1991 will be
the actual income for 1990/ 1991.
Section 18 deals similarly with
Case 5 income, i.e. rental income.
Under Section 23 the date for
filing the annual tax returns has
been extended from the 31st of
December to the 31st of January.
However, the return required to be
made by the 31st of January 1991
is for the actual income of the year
1989/1990 and as regards trading
income the income based on
accounts ending in the year 1989/
1990. In making your income tax
return for the 31st of January you
do not have to concern yourself
wi th your actual incomee for
1990/1991. If, for example, your
accounts for your business are
made up to the 31st of July of each
year the trading income you will be
concerned with in making your
return by the 31st of January 1991
will be the income as set out in your
accounts for the year ending the
31st of July 1989 and not the year
ending the 31st of July 1990.
Under Section 24 preliminary tax
is now payable by the 1st of
November in each year and there is
no period of grace thereafter. If the
amount of preliminary tax does not
at least equal 90% of the tax which
"The moral appears to be, pay
preliminary tax in an amount
equal to your tax liability for your
previous year and avoid the risk
of paying too little."
is ultimately deemed to be payable,
the tax-payer will be liable to
interest on the balance from the
time the preliminary tax became
dua However the tax-payer can pay
as preliminary tax, the amount of
tax for which he or she was liable
in the previous tax year without
incurring the risk of interest even if
that amount of preliminary tax
ultimately works out at less than
90% of the tax for which he is
ultimately liable. The. moral appears
to be, pay preliminary tax in an
amount equal to your tax liability
for your previous year and avoid the
risk of paying too little. The balance
of the tax due for this year 1990/
1991 will not have to be paid until
at least the date for filing your
returns for 1990/1991 which will be
the 31st of January, 1992.
Section 26 deals with with-
holding tax for professional ser-
vices. Previously where tax was
withheld a tax credit could be
obtained in the year of assessment
the basis period for which was the
year in which the tax was withheld.
For example, if my accounts were
done up to the 31st of July and the
tax was withheld from me in April
1988 i.e. in my accounts year
ending 31 July 1988 I would get a
tax credit for the amount withheld
in the year of assessment
1989/1990, my accounts year
ending the 31st of July 1988 being
the basis period for the year of
assessment 1989/1990.
Profits for 12 months to 31 July
1988
20,000
Tax withheld April 1988 5,000
Assessment for financial year
1989/1990
20,000
Tax on assessment (say) 6,000
Less:
tax credit
5,000
Tax payable
1,000
With the new changes, if tax is
withheld in one financial year i.e. 6
April to the following 5 April, I will
not get a tax credit for the amount
withheld until the following year of
assessment. For example if tax was
withheld from me in August 1990,
I will get a tax credit for that
amount withheld in the year of
assessment 1991/1992.
Profit for the year ending
30 September 1990
20,000
Tax withheld August 1990 5,000
Assessment
for financial
year
1990/1991
20,000
Tax on assessment (say) 6,000
No tax credit
Year ending the 31st of July, 1989
-
£20,000
Year ending the 31st of July, 1990
-
£32,000
Under the transitional arrangements my taxable income under Case
2 of Schedule D, 1990/1991 is:
£20,000 + £32,000 x /2 = £26,000
Under the old rules my taxable income would have been £20,000.
Under the new rules if the transitional provisions did not apply my
taxable income would have been £32,000.
If my accounting year ends on the 31st of July of each year and
taxable earnings for:
Year ending the 31st of July, 1989
-
£20,000
Year ending the 31st of July, 1990
-
£26,000
Under the transitional arrangements my taxable income under Case
2 of Schedule D, 1990/1991 is:
£20,000 + £26,000 x Vi = £23,000
However the taxable income for the transitional period 1990/91
cannot be less than:
125 x £20,000
=
£25,000
100
201