Coding: coding deductions and expenses: automated coding of P11D benefits and expenses from ECS
The majority of benefits and expenses information relating to CY-1 or CY and processed onto ECS from forms P11D or in year benefit changes will be automatically coded for CY and CY+1 on the individual’s record. This process will automatically amend the individual’s tax code to reflect the benefit details received from ECS. Details of benefits and expenses will be held in the income, allowances, benefits and deductions area.
Work items will be generated when the P11D information cannot be automatically coded.
If an employer has registered online to tax their employees’ benefits and expenses through their payroll the benefits will not be forecasted or included in an employee’s tax code for future tax years because the tax is now being collected at source. For more information about this process, see PAYE58701
The remainder of this subject is presented as follows
The process will consider if automated coding can take place where P11D end of year information has been captured on ECS and the benefit forecast for CY and / or CY+1 differs from coding and for in-year benefit changes - these will mostly be car changes.
Where automated coding can take place, the process will first look at the coding record and automatically update and issue the code, benefit and expenses details will be recorded in the income, allowances, benefits and deductions area. A code type Automatic Code Changed will be displayed in Code Details where automated coding has taken place.
The following cases will not be automatically recoded and no work items will be produced
- Deceased cases
- The record is for a main incapacity benefit or unemployment benefit
The P11D information for these cases will be recorded in the income, allowances, benefits and deductions area for the relevant year.
Prior to the Annual Coding Main review only the CY code will be updated and issued, the ECS benefit forecast for CY+1 will be included in the CY+1 coding record.
Where the Annual Coding Main review or Annual Coding Supplementary review has taken place and a CY+1 code already exists, then the CY+1 code will be updated and the code issued.
Automated coding work items
Work items will be produced where automated coding
- Could not proceed
- Has taken place but a P6 could not be issued
- Has taken place but a P2 could not be issued
Further information can be found at PAYE12005.
Where a P2 is issued automatically as a result of information recorded on ECS, the P2 will include the relevant notes for the coded items.
Expenses claimed under S336 ITEPA 2003
The following benefits do not forecast amounts for coding purposes and must not therefore have the associated expenses claimed coded out (unless the customer specifically requests excess expenses in the CY code). The relevant assessable amount will be included in the informal tax calculation for the P11D year.
- Assets transferred (P11D section A)
- Entertainment (P11D section N)
- Qualifying relocation expenses (P11D section J or M)
- Non-qualifying relocation expenses (P11D section N)
- Travel and subsistence (P11D section N)
Where a P11D and a section 336 claim are received together, you should follow the guidance at PAYE130040 to ensure the correct amounts are recorded in IABD.
The inclusion of Job Expenses and Benefit in kind may create some new SA cases.
Auto coding inappropriate
Because special rules apply to the benefits and allowable expenses in respect of some ministers of religion, automated coding may result in an incorrect amount being included in the code. This may also apply to other employers. In such cases officers with the appropriate permission can set the ECS-COP Inhibition signal on the employer record to prevent automated coding. SAM125041 gives further guidance on what information should be used from the Self Assessment return in these cases.
ECS-COP inhibition signal
The ECS Manual at ECSM19000+ explains the situations where the ECS-COP Inhibition signal is set and when it should be lifted. Failure to lift this inhibition signal will result in poor use of electronically submitted information as it will remain on ECS and not be sent to the PAYE Service.
To ensure that automated coding can be applied to benefits and expenses information submitted using HMRC Online Services you will need to review the ECS Inhibition Cases List InfoNET report regularly to identify cases where the signal should be lifted.