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HMRC internal manual

Debt Management and Banking Manual

HM Revenue & Customs
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Pre-enforcement: coding out: Self Assessment (SA) and Tax Credit (TC) overpayments: further SA points: customer objects to coding out of SA debt before 6 April

Coding out SA debts through PAYE tax codes will have the effect of reducing a customer’s take-home pay and may affect certain means-tested benefits. You should tell customers who tell you they may be affected:

to contact their benefit provider for advice

that they can get more information on income-related benefits on the under Benefits.

If the taxpayer contacts you by letter or phone objecting to coding out, advise that we do not need their authority to code out the debt.

If the amount is remitted on SA, you should normally only agree to stop the coding out process if the taxpayer agrees to pay immediately by debit or credit card.

If the amount has not yet been remitted on SA, you should:

  • establish if the taxpayer has a PAYE source of income, for example is employed or receives a UK based pension. Staff working in DTO campaign offices who have access to NPS can view NPS to establish details of the taxpayer’s employment and normally
  • agree to stop the coding out process only if the taxpayer either:

    • does not have a PAYE source
    • agrees to pay immediately by debit or credit card.

Whether the debt are already remitted or not, if the taxpayer demonstrates that he or she is genuinely unable to pay in full, and that collecting the debt over 12 months through their tax code will cause them hardship:

  • negotiate an acceptable time to pay arrangement
  • set up a direct debit.

When negotiating time to pay:

  • check that the taxpayer did not default on previous TTP arrangements
  • ensure that the taxpayer is serious about their obligations to make payments on time
  • press for the shortest arrangement period possible.

If you agree not to continue with coding out, and the amount has already been accepted for coding out by NPS, you must remember to remove it from the code following the guidance in the appropriate Standard Work Instruction (SWI).

If the customer defaults on the arrangement, the Time to Pay Monitoring Office (TTPMO) should follow the appropriate SWI.

Tell the customer that if they default on the arrangement, the debt will either:

  • be coded out
  • sent to a Debt Collection Agency (DCA) to pursue.

Additional guidance you will need when dealing with customer contacts

See the appropriate SWI for guidance on the actions to take following customer contact about coding out including:

  • time to pay cases
  • taxpayer does not want tax deducted from his code
  • taxpayer disputes the debts
  • taxpayer claims to have paid
  • taxpayer can not pay today or agree TTP and does not have a PAYE source of income
  • if TP has a PAYE source of income and you can not agree acceptable payment terms.