EM6025 - Contract Settlements: Interest: Certificates of Tax Deposit - Example
The guidance about contract settlements at EM6000+ only relates to direct tax. You must never include VAT or VAT penalties in a contract settlement.
A Certificate of Tax Deposit for 拢100,000 was purchased on 1 June 2002. It is tendered in respect of a contract settlement which consists of
| 听 | 听 |
|---|---|
Tax - due 31 January 2003 |
拢50,000 |
Tax - due before 1 June 2002 |
拢30,000 |
Interest - Section 86 |
拢10,000 |
Penalties |
拢20,000 |
Expected Offer |
拢110,000 |
The interest has been computed on the basis that the 拢50,000 was paid on the due date and the 拢30,000 was paid on 1 June 2002. The customer wants the balance of the Tax Deposit after payment of the tax element of the settlement to be repaid and set, with interest, against the interest and penalties.
The CTD Team inform you that the tax of 拢50,000 is covered by 拢49,259.09 principal and 拢740.91 interest thereon at the higher rate. After applying 拢30,000, with no interest, to payment of the remainder of the tax, the balance of the Deposit is 拢20,740.91, which attracts interest at the lower rate up to 31 January 2005, the settlement, of 拢675.22.
The settlement will be met as follows
| 听 | 听 | 听 |
|---|---|---|
Tax |
拢50,000.00 |
- 拢49,259.09 principal + 拢740.91 interest |
Tax |
拢30,000.00 |
- 拢30,000.00 principal only |
Interest/Penalties |
拢21,416.13 |
- 拢20,740.91 principal + 拢675.22 interest |
Paid |
拢101,416.13 |
- 拢100,000.00 principal + 拢1,416.13 interest |
Balance To Pay |
拢8,583.87 |
|
Offer |
拢110,000.00 |
The letter of offer should include:
"바카라 사이트�..offer the sum of 拢110,000
less 拢101,416.13 met by the surrender of Certificate of Tax Deposit No ... dated 1 June 2002 and the application of the full amount of interest allowable on the certificate.
The balance of 拢8583.87 to be paid ...."
The interest of 拢1,416.13 is income of the customer, assessable as Savings and Investment Income. A note should be made to ensure that the interest is returned and assessed.