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HMRC internal manual

Debt Management and Banking Manual

From
HM Revenue & Customs
Updated
, see all updates

Pre-enforcement: coding out: class 2 NIC debts: reduction to coded out debt after the coding run and during the tax year of collection

For example, for debts coded out for collection in 2014-15.

Where a collection area of ’Coded Out’ is present against a debt and a reduction is made to the debt via NPS(NI), an update will automatically be issued to NPS(PAYE) and a further coding run takes place.

When an adjustment is made to the amount of debt coded out following deduction from the taxpayer’s wages for the current tax year, the tax overpaid to date is returned through the taxpayer’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: £70 of a £280 outstanding debt will have been collected by month 4 of the tax year. If the outstanding debt is reduced to £140 then only £35 would have been due at month 4 of the tax year. The revised code would make this adjustment by returning £35 through the taxpayer’s wages and collecting the remaining £105 over the remaining eight months of the tax year.

Example 2: £70 of a £280 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 £70 through the taxpayer’s wages.