SAM141020 | Transfer of liability: transfer from SA to PAYE: manual transfer of balancing payment to PAYE

From HM Revenue & Customs · Self Assessment Manual

Whilst balancing payments are automatically transferred to PAYE in most cases, the manual process remains in place for use in certain circumstances.

This subject is presented as follows

Early filers
Exceptional cases

Early filers

Scenario

A customer who is liable to make payments on account may file their return before the due date for the second payment on account. The return does not indicate that the balancing payment is not to be coded. You may in turn capture the return before the payment on account is settled. The balancing payment may amount to £3000 or more only because the unpaid payment on account is added to the balancing charge at the time of capture.

When settling the second payment on account, the customer may ask for confirmation that the balancing payment is to be collected through their PAYE coding. Although at the time of capture the total ‘underpayment’ amounted to £3000 or more, it now falls within the limit for collection by coding. If the balancing charge is not coded, the customer will be penalised for submitting the return early.

You should code out the balancing charge by restricting the PAYE code, if possible, in this scenario.

Note: From 2015-2016, Class 2 NICs may be collected as part of the SA balancing payment for self employed customers. However, the Class 2 NICs part of the balancing payment must not be coded out as this is not covered by legislation.

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Exceptional cases

The process to transfer the balancing payment to NPS remains available for use, in exceptional cases, where the balancing payment has not been automatically transferred to PAYE.

The most likely exceptional cases are

Return received by 31 October but not captured until after 31 December
Return received within time limits and case meets the criteria for transfer but the SA record was incorrect at the time of capture. Additionally, before transferring an underpayment to PAYE, SA performs a rough calculation using the income details from the highest PAYE source on the return, to check that the underpayment does not

More than double the liability (introduced 6 April 2012)
Collect more than 50 per cent of the gross pay

When brought to your attention, if you decide that the whole of the balancing payment can be collected through PAYE, you should transfer the balancing payment to NPS and make a manual update to the NPS Accounting Financial Events Summary screen. You should also record the transfer on the customer's SA record.

Notes:

Table shown as recovered text

1. Where the process to transfer the balancing payment is used after 28 February any surcharge on the record will not be automatically adjusted by the transfer process. Where there is a surcharge you must either delete it (if reducing to nil) or discharge the inappropriate amount (where only part of the surcharge is to be cancelled). Note: Surcharge was replaced by tax geared late filing penalties for tax years 2010-11 and later tax years 2. Where the process to transfer the balancing payment is used 30 days after the tax return filing date, any late payment penalty on the record will not be automatically adjusted by the transfer process. Alternatively, where there is a late payment penalty you must either delete it (if reducing to nil) or discharge the inappropriate amount (where only part of the late payment penalty is to be cancelled). Note: Late payment penalties replaced surcharges for the tax year 2010-11 onwards 3. If, as a result of an HMRC error, you need to code out an underpayment after 5 April following the end of the return year, you should first ensure that the criteria for collection through PAYE are met. These are The balancing charge must not exceed £2999.99 The return must be have been filed On paper, by 31 October Received online and fully processed by 31 December Where this is the case you should follow the Action Guide at SAM141021 Note: Where an online return has been logged as received on 31 December but has not been fully processed when the transfer to PAYE process is run overnight on 31 December, the underpayment may not be automatically transferred 4. If following the transfer of a balancing payment to PAYE the customer makes a payment intended to settle the amount, see subject ‘Transfer of liability: transfer from PAYE to SA (SAM140032) and follow the Action Guide

PAYE record

Existing procedures will need to be followed to update the customer's PAYE record when an SA balancing payment is coded out in PAYE. Detailed guidance is given in the PAYE Manual at PAYE12070.