Function documentationTaxes and Management Act (Section 16)

 

Under the terms of Section 16 of the Taxes and Management Act, the HM Revenue and Customs (HMRC) 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 HMRC 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 Taxes and Management Act. The settings include:

  • Withholding tax types

  • Withholding tax codes

You must also maintain the withholding tax details of each of your company codes.

Master Data

Enter the required information as described in the vendor master 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

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 HMRC requires you to submit the return as a Microsoft Excel file.