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HMRC internal manual

Claimant Compliance Manual

Discrepancy Examinations: Action: Considering income discrepancy cases with Employed income

Income discrepancies involving employed income are identified where the amount a customer enters on the claim form TC600 at Box 5.3 or the renewal notice TC600RD at Box 2.2 is not the same as their employer reported on form P14 for that year.

The amount entered by the customer could legitimately differ from the amount reported by the employer where the customer:

  • had Gift Aid payments, pension contributions or trading losses as described at CCM17270 
  • made contributions to charity under a payroll giving (GAYE) scheme and the employer hasn’t deducted it from their gross pay
  • was paid tips and gratuities that were not processed through the payroll
  • received a payment in connection with the termination of their employment, for example redundancy, pay in lieu of notice (PILON) or golden handcuffs
  • received a payment because the terms of their employment were changed, for example compensation for loss of flexible working hours
  • had taxable gains from security options, such as company shares, bonds etc acquire by reason of their employment
  • received strike pay from their trade union
  • paid expenses from their earnings which arose wholly, exclusively and necessarily in the course of their work and the employer did not reimburse these expenses
  • made payments which are deductible for income tax purposes, such as fees and subscriptions to professional bodies, indemnity insurance premiums
  • had flat-rate expenses agreed by their employer and HMRC to maintain or renew tools or special clothes
  • was off on maternity, adoption or paternity leave

Where the customer is able to provide information or evidence in support of any of the above circumstances you should decide to accept what they say and either:

  • not amend the claim or award, see CCM17350 
  • use the information provided by the customer to amend the claim or award, see CCM17355 for pre-award cases or CCM17360 post-award cases

Note: Some employers are adding Benefits in Kind to the total taxable pay shown on the P60. If there is a discrepancy between the income figure shown on the PAYE system and the NTC system you must check with the employer to establish if the Benefits in Kind have been included on the P60. See TCM0118220 for Benefits in Kind that are excluded for Tax Credit purposes. If the P60 includes any of the Benefits in Kind listed, deduct them from the P60 income figure.

Where an employed customer disputes the information provided by their employer, or denies that they are employed by them and the discrepancy is:

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Any other differences are likely to be the result of customer error and you will decide to amend the claim or award based on HMRC’s information, see CCM17370.