SolvedPAYE81071 | PAYE operation: double taxation claims submitted by non resident individuals: cancellation of double taxation relief: coding (Action Guide)
From HM Revenue & Customs · PAYE Manual
To issue a tax code when the double taxation (DT) relief has been cancelled, follow steps 1 - 10 below.
The guide is presented as follows
Steps 1 - 6
Steps 7 - 9
Step 10
Cancellation of DT relief - coding CY
Before you issue a tax code for the year in which a double taxation exemption has been cancelled, you will need to calculate the amount of income that will be liable to UK tax for all income sources that were previously exempt. This amount will be entered as the employment estimated earnings amount in IABD.
1. In Excel select SEES then Other Calculators + Forms + NPPS then Dates Calculator
Select time apportionment tab
‘Base Period’
‘From’ date is start date of current tax year
‘To’ date is the following 5 April
‘Amount’ is total estimated amount of income for the year
‘Apportionment Period’
‘From’ date is date of cancellation of exemption
‘To’ date is following 5 April
This calculates the amount of income liable to UK tax
Print a copy of the calculation
Repeat for each source of income that was previously exempt
Where no state pension is received, or the state pension was not exempt, go to step 3
2. For state pension, only the liable amount of state pension is entered in the State Pension Box in IABD
Calculate the amount of liable state pension as in step 1 above
3. Update employment estimated earnings to show the liable estimated amount
In IABD Landing, select other form and relevant tax year. Enter date of receipt
Drill down into Employment Estimated Earnings
Enter the liable amount, as calculated in step 1, for all income that was previously covered by the exemption
Enter the gross estimated amount for any income that was not covered by the exemption
Save
Where no state pension present or where state pension was not covered by the exemption, go to step 5
4.
Drill down into Pensions and then into State Pensions
Record the liable amount as calculated in step 2
Set the Estimated National Insurance Benefit indicator
Set the frequency to Annual
Save and Save again
Select save
5.
Select Individual
Select Indicators
Delete freehand note in Additional Notes
Save
Enter Contact History note - in the Actions box enter ‘DT exemption cancelled with effect from [date]. IABD updated for year of cancellation’
Save
6. You will now be taken to the Coding Screen
You will need to request the P60 for the current tax year as an underpayment of tax may arise
Select Notes
Select Special Notes
Select ‘P60’ and the current tax year and Save
Ensure that the P2 and P6 are showing as Issue, and save / submit
Continue with the coding following normal rules and allocate any unused allowances to secondary sources as applicable
Ensure all codes are issued on a week 1 / month 1 basis
Complete Contact History note - in the Actions box enter ‘[tax year] coding following cancellation of DT exemption’
Cancellation of DT relief - coding CY+1
7. In IABD landing select Other Form, select CY+1 tax year, enter date
Drill down into Employment Estimated Earnings
Enter full estimated pay for each income source
Save
Where no state pension is received, or state pension was not exempt, go to step 9
8.
Drill down into Pensions, then into State Pensions
Enter full amount of state pension for CY+1
Set Estimated National Insurance Benefit indicator
Set frequency of payment to Annual
Save and then Save again and submit
9. Enter Contact History note - in the Actions box enter ‘IABD update CY+1 following cancellation of DT exemption’
Inhibit Automatic Reconciliation and set No Repayment indicator
You will need to inhibit automatic reconciliation and set the No Repayment indicator for the year the double taxation relief was withdrawn. This is because when reconciling the year you will need to enter the non-liable amount of income as Foreign Pension Allowance in IABD - see PAYE81072 for how to reconcile the year of cancellation of double taxation relief.
10. In Reconciliation
Select tax year for year of cancellation of exemption
Select allow / inhibit auto reconciliation
In Indicators
Set No Repayment indicator
In Additional Notes box, enter ‘No Repayment indicator set as Double Taxation relief cancelled wef [date of cancellation of exemption]’