Extended Withholding Tax 
Extended Withholding Tax
Use
The Extended Withholding Tax solution comes ready configured with all the settings you need to track and remit withholding taxes for:
Features
Construction Industry Scheme
Under the terms of the
Construction Industry Scheme, the Inland Revenue requires you to track and report all payments made to construction companies, and in some cases to withhold tax. The Inland Revenue recognizes three different types of subcontractors (any builder or construction company carrying out construction work for a third party), each of it which it issues with different forms of documentation:When you make payments to these subcontractors, you are required to withhold tax on the portion of the payment that is for labor and fill out a
tax payment voucher.When you make a payment to these subcontractors, you do not deduct tax. The subcontractors will present you with a
gross payment voucher, which you have to sign and return. However, no specific SAP report is required.You do not withhold tax on payments to these subcontractors. However, you must fill out a
gross payment voucher for every payment that you make.In the United Kingdom, you withhold tax when you make a payment, not when you post an invoice.
Taxes and Management Act
Under the terms of Section 16 of the Taxes and Management Act, the Inland Revenue may require you to file a return with a list of external service providers to whom you have made payments of over GBP 1,000 for a specific tax year – but note that some service providers, such as utility companies, or those already covered by the construction industry scheme, are exempt.
You are not required to withhold any tax on such payments. The Inland Revenue is only interested in the amounts of the payments themselves.
Activities
Customizing
For generic information about customizing Extended Withholding Tax, see
Settings for Extended Withholding Tax: Overview.
Country Version United Kingdom comes with sample Customizing setting for the Construction Industry Scheme and for the Taxes and Management Act. The settings include:
You must also maintain the withholding tax details of each of your
company codes.Master Data
Enter the required information in the vendor master (
control data and withholding tax data).
If, after the tax year has already started and you have already made payments to a vendor, you discover that you must include this vendor in the Section 16 return as well, run the Program for Recreating Withholding Tax Data (RFWT0020) for that vendor. This program checks all payments posted in the tax year to date and assigns the new withholding tax codes to them.
Reporting
Under the terms of the Construction Industry scheme, the Inland Revenue requires you to submit copies of various vouchers (known in the system as withholding tax certificates) every month. At the end of the year, you are also required to file a withholding tax return (see
Withholding Tax Reporting).For the purposes of Section 16 of the Taxes and Management Act, you may also be required to file a Section 16 return with the details of payments to nonemployees. The Inland Revenue requires you to submit the return as a Microsoft Excel file, on disk.