SAM121546 | Underpayment of less than £3000 arises and the taxpayer has not ticked to show underpayment is not to be coded - Action 6

In a PAYE case, where the balancing payment is less than £3000.00 follow steps 1 - 5 below. The total is collected by way of a coding restriction in the CY+1 coding.

This will be done automatically by the system provided

• The return is received by 31 October for a paper return following the end of the return year, or 30 December for an online return

• The taxpayer has not specifically requested on the return that it should not be coded out

Where the paper return is received by 31 October but is not captured until after 31 December, you must consider whether the underpayment will be able to be successfully collected through the PAYE code by following the Action Guide below, unless the taxpayer has specifically requested on the return that the underpayment should not be coded out.

Where the paper return is received after 31 October but has not been captured by 31 December or an online return is received after 30 December, you must not code out the underpayment. Where the underpayment is below £1.00, use function RECORD TRANSFER TO COP to clear the SA account. Otherwise use function WORK LIST CASES or function SELECTED CASE to delete the work item.

For details of how to access the SA functions, select ‘Index Of Functions’ on the left of the screen.

The Action Guide is presented as follows

In all cases follow Steps 1.

If the whole balancing payment can be coded out follow Steps 2 - 4.

If the whole of the balancing payment cannot be coded out follow Step 5.

In all cases

1. Decide whether the whole of the balancing payment can be collected through the CY+1 code

• If today’s date is after 31 December in the year following the return year, and the return was received after 31 October you must not code out the underpayment

• If the PAYE source has ceased, you clearly cannot code out the balancing payment

• If the level of earnings is insufficient for the whole balancing payment to be collected, you must not code out any of the sum

• If a potential underpayment is already coded out for CY+1, collection of that sum through the coding takes priority over the balancing payment that you are now considering

• If the taxpayer has asked for collection of the balancing payment to be spread over more than one year, you cannot accept the claim. Consider a Time to Pay arrangement

If the whole balancing payment can be coded out

2. If the underpayment is £1.00 or more, enter the amount to be collected on the NPS record. Annual coding will pick up the details

• If annual coding has already taken place, update IABD screen on NPS for CY+1

3. Use function RECORD TRANSFER TO COP to update the taxpayer’s accounting record

4. If there are already underpayments waiting to be coded for CY+1 write to the agent or unrepresented taxpayer giving a breakdown of the amounts which will appear as one deduction on the P2

If the whole of the balancing payment cannot be coded out

5. Write to the taxpayer or agent

• Explain why the balancing payment cannot be collected through the coding for CY+1

• Advise that the sum due should be paid by the due date otherwise interest will be charged on late payment. If the due date has already passed, adapt your advice accordingly