As the next lot of self assessments are due to be paid by the end of the month, can anyone shed some light on a couple of questions?

1. How do HMRC calculate the POA? - 50% of last year's bill?
2. What do you do, if you believe it to be inaccurate/too high?

A practice manager is advising that it is best to pay it despite the disagreement and stated that fines could be liable if you under pay.

My thoughts are that the POA is based on last years income and therefore potential to be inaccurate if circumstances have changed. The most commercial thing to do surely is disagree now, and pay 50% of your expected liability.

Any thoughts would be greatly appreciated.
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The POA is based on last years tax liability - 50% in July and 50% in January.

As your tax liability is based on your profits, if this years profits are going to be significantly lower than the previous years then you can apply to reduce your POA using form SA303.

just a word of warning if you make a false claim or it turns out that your profits and hence tax liability for the current are not reduced then there will be interest and penalties to pay on the tax that should have been paid before the SA303 was submitted.
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Payment on account is normally 50% of previous year's liability. If you believe it to be excessive, you can ask for it to be reduced by either phoning the contact centre or completing a SA303

If you negligently ask for it to be reduced, knowing that the actual liability is higher, then there is the possibility of a penalty although I personally have not yet seen one in practice. If you underpay, there will be an interest charge
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i think it is very unlikely that the Revenue will charge penalties - just interest - i have known people to reduce poa for cashflow reasons knowing that interest will be charged
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i think it is very unlikely that the Revenue will charge penalties - just interest - i have known people to reduce poa for cashflow reasons knowing that interest will be charged

I guess it's all a question of degree

If you normally pay ?0K every 6 months and one year you reduce it to nil for cashflow reasons and in due course the liability is ?0K, you have to point out to the client the possibility of a penalty being charged

As the Revenue's manuals show (http://www.hmrc.gov.uk/manuals/emmanual/EM4660.htm), the request has to be blatant or regular
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very true but also very rare
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very true but also very rare

As I said, I've never seen one in practice
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thanks to everyone for your responses.
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