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HMRC internal manual

Debt Management and Banking Manual

From
HM Revenue & Customs
Updated
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Pre-enforcement: coding out: adjustments to amount outstanding following coding run

Any adjustment to the amount of outstanding debt that is included in a code in operation for the current tax year will result in the tax overpaid to date being returned through the customer’s wages. This is due to PAYE operating tax codes on a cumulative basis that ensures the correct amount is collected evenly throughout the tax year.

Example 1 

£400 of a £1,200 outstanding debt will have been collected by month 4 of the tax year. If the outstanding debt is reduced to £600 then only £200 would have been due at month 4 of the tax year. The revised code would make this adjustment by returning £200 through the customer’s wages and collecting the remaining £400 over the next eight months of the tax year.

Example 2 

£400 of a £1,200 outstanding debt will have been collected by month 4 of the tax year. If the outstanding debt is cancelled and removed, the revised code will make this adjustment by returning £400 through the customer’s wages.