OUTLINE OF NEW TAX PAYMENT SYSTEMIncome tax will be payable in three instalments.

The first two, called interim payments, are payments on account due on 31 January in the year of assessment and 31 July in the following year.

Each payment is generally 50% of the income tax liability of the preceding year of assessment, less any tax deducted at source.

The third and final payment, due on 31 January following the end of the year of assessment, discharges the balance of the income tax liability and the whole of any capital gains tax.

INTERIM PAYMENTSIn the case of a continuing trade, profession or vocation, interim payments are due where the taxpayer has been assessed to tax for the preceding year and where the amount assessed exceeds the income tax deducted at source.

No interim payment is required if the major part of the taxpayer's liability is met by deduction at source or if the previous year's liability was below a certain stated level.No interim payments will be required in the year in which a trade is commenced.

If a trade has terminated, or if profits are falling, and the taxpayer believes that the liability will either be nil or reduced a claim may be submitted that interim payments should be nil or appropriately reduced.

FINAL PAYMENTThe final balance of the taxpayer's income tax liability, calculated under self-assessment, is normally due on 31 January following the end of the year of assessment.

The whole of any capital gains tax liability for the year in question is then due.

REPAYMENT SUPPLEMENTWhere tax has been overpaid the taxpayer will also be entitled to a repayment supplement, effectively representing interest on the overpayment.

Repayment supplement will be due by reference to the dates when payments of tax were due.

There is therefore effectively a matching of interest on late payment and repayment supplement on tax overpaid.TRANSITIONAL PROVISIONS FOR 1996/97There are rather complicated transitional provisions for the calculation of payments for 1996/97.

Broadly speaking payments for tax due under schedule A and schedule D, cases III-VI are all included in the first interim payment whilst the schedule D, case I or II payment is divided into two instalments as set out above.

The balance of any tax liability is then due as usual on the following 31 January.TAXPAYER STATEMENTSThe Revenue will issue statements to taxpayers of their anticipated interim and final payments.

Those for 1996/97 are likely to be issued some time during autumn 1996, well before the due date of 31 January 1997.

Taxpayers will also generally receive reminders, warning notices of interest, charges on amounts paid late and late filing penalties.SURCHARGES ON LATE PAYMENTA punitive feature of the new system is the imposition of an automatic 5% surcharge on the late payment of capital gains tax or the final income tax instalment where these are 28 days in arrear.

The surcharge is not imposed on late int erim payments.

If any tax still remains unpaid six months later there is a further 5% surcharge.

The taxpayer has a right of appeal against a surcharge.

They may set it aside if the taxpayer has a reasonable excuse.

Inability to pay is not a reasonable excuse.

INTERESTArrears of tax, whether interim payments or the final payment, will carry interest from the due dates.

Moreover, where a taxpayer has made a claim to reduce interim payments which transpires to be incorrect, interest will also be charged.

The principle is that the interest charge is then based on the lesser of the actual underpayment of tax for the year and what the tax would have been on the preceding year basis.PENALTIESThere are some 30 sections of the Tax Management Act 1970 imposing penalties of one kind or another that have been amended and updated under self-assessment.

These include an automatic flat rate penalty of £100 upon individuals and trustees for failing to file their tax return by the due date, with a further £100 penalty if the failure continues for another six months.

In the case of failure to deliver a partnership return each partner will be liable to the same automatic penalty.

The Revenue may also apply to the commissioners for daily penalties.

Tax-related penalties are then chargeable for the filing of incorrect returns.Generally penalties are determined and imposed by a Revenue officer, with a taxpayer having the right of appeal to the commissioners.

But the Revenue officer must apply to the commissioners for the imposition of daily penalties.APPEALSUnder self-assessment the taxpayer no longer needs a general right of appeal against an assessment to tax.

However, there are cases where a right of appeal is required, in particular where the taxpayer does not self-assess and the assessment is raised by the Revenue.

The right of appeal is also required in certain other circumstances, notably where a self-assessment is amended by a Revenue officer pursuant to an enquiry, and where there is a discovery assessment.

Recourse to an appeal is also required for amendments to claims by the Revenue and also for surcharges and penalties.

The appeal hearing is to be heard at the taxpayer's option, by reference either to the place of residence or place of business or employment.

The procedure for the conduct of appeals to the commissioners has essentially not changed.