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.
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.
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.
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.