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HMRC internal manual

Debt Management and Banking Manual

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HM Revenue & Customs
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Pre-enforcement: coding out: Self Assessment (SA) and Tax Credit (TC) overpayments: further SA points: SA end-of-year reconciliation

End-of-year reconciliation which includes a coded out debt

If the taxpayer does not have a SA tax liability, end-of-year reconciliation takes place in NPS only.

Where the taxpayer is also in SA, NPS(PAYE) does not perform the reconciliation; this takes place in SA on receipt of the SA return. When SA has completed reconciliation, it passes details to NPS. NPS will update accounting entries including details of the debts sent to NPS(PAYE) for collection and send an appropriate credit to SA or tax credits.

Full details of this process are covered in PAYE14010.

SA end-of-year reconciliation

In SA reconciliation, the order of priority for the allocation of PAYE tax deducted at source (P60 figure) is:

  1. coded out debts
  2. any balance of PAYE tax in excess of the debt is available to reduce the SA liability; this is done automatically in the SA tax calculation.

SA tax returns

The functionality that processes all SA tax returns (for example, Paper Tax Return, Short Tax return and Online Return) now includes the amount of the coded out debt.

New box on SA tax return

An additional box has been added to the tax return; this is for the taxpayer to insert the total amount of coded out debts.

Coded out details and pre-populated data in SA

The amount of any coded out debt is included in the LDC pre-populated fields and used in the tax calculation.

On line Tax Return SA (OTRSA)

The amount of the coded out debt is included in the pre-populated amount that is shown on the OTRSA return screens. This can be overwritten but a message is displayed to ask for confirmation of the amount entered.

Third party software

The amount of the coded out debt does not automatically populate third party software. The amount coded out can be obtained by the taxpayer, or their agent from the notice of coding for the year.

Coded out amount on paper return processing and online processing

SA will compare the amount of the coded out debt on the taxpayer’s SA return with the system pre-populated coded out debt amount and:

  • in self calculation cases (paper and internet-filed returns), where there is a mismatch, the system will automatically change the amount to the pre-populated coded out figure and issue a Tax Calculation SA302 with repair message: ‘Outstanding debt included in your tax code (Tax Calculation box 9) has been changed to £xx.xx because the figure on the tax return does not agree with our records.’
  • in revenue calculation cases, SA will always use the system coded out figure and issue an SA302.

Note: Where a debt has been coded out and there is a mismatch, an SA302 will now be issued for returns processed online for the first time.

Coded out figures for amended paper and online return processing

Where an amended return is received, SA will compare the entry on the taxpayer’s return for debt with the system pre-populated figure and:

  • in self calculation cases (paper and internet-filed returns), where there is a mismatch, the system will automatically change the figure to the pre-populated coded out amount and issue an SA302 with repair message: ‘Outstanding debt included in your tax code (Tax Calculation box 9) has been changed to £xx.xx because the figure on the tax return does not agree with our records.’
  • in revenue calculation cases, SA will always use the system pre-populated coded out figure and issue an SA302.

No amended reconciliation result will be sent to NPS.

The amount of the debt collected used in the first calculation is used in any subsequent amendments. This is because:

  • SA sends the amount of the debt collected to NPS from the initial tax return capture
  • NPS uses this to calculate the amount available to allocate to the debt and sends to the HOD.

There is no longer a link with NPS so the original amount of the debt collected cannot be changed.

Create Return Charge (CRC)

CRC functionality now includes the amount of the coded out debt collected. This is pre-populated in the CRC function.

Where coded out debts are included, CRC will only send reconciliation data to NPS where there has been no previous charge recorded for that year, from either CRC or a return.

A warning message will be displayed where the amount of coded out debt entered either:

  • exceeds the figure of Tax Deducted at Source (‘Amount of collected coded out debt entered exceeds the figure of Tax Deducted at source’)
  • differs from the pre-populated figure held (‘Amount of collected coded out debt is less than £xx.xx’).

You must reduce any PAYE tax included in the tax deducted at source field on CRC, by the amount of debt.

If you are creating a return charge of NIL to close that year in SA you should reduce the pre-populated amount of debt coded out to 0.00.

If you use CRC following the capture of a return, or CRC has already been used, the amount of debt field is protected and cannot be amended.

See SAM101092 for additional guidance.

Return captured for the wrong taxpayer

Where a return has been incorrectly captured for a taxpayer with debts coded out, a reconciliation result will have been sent to NPS. Where the return is unlogged, the reconciliation amounts can not be withdrawn. NPS will have advised the system that owns the original debt that it has been collected, or not, based on the wrong tax return information. Unlogging the return will not correct this.

See SAM141045 for additional guidance.