Coding: coding: general principles: coding and self assessment
The procedures for dealing with claims in Self Assessment (SA) depend upon whether or not a claim is included in a return.
Advice on the following is available
Accepting or refusing claims
If, having considered the responses to your questions, you decide you can give effect to the claim
- Amend the code
- Advise the individual in writing that your enquiry is complete. Your letter should incorporate the following wording
‘On … I gave you notice of my intention to make enquiries into your claim for …. My enquiries are now complete and your code for 20-- -20– has been adjusted to give effect to the claim’.
Where you decide the claim can be given effect to, but entitlement depends in part upon information not known at the time, for example
- An age-related allowance based upon income for the year of the coding allowance
An amount paid for the year which cannot be finalised until after the end of the year
- Make it clear that the amount coded is provisional and the matter may be adjusted after the tax year has ended
If you decide to refuse the claim you should not alter the code. You should issue a notice of completion asking the individual to withdraw the claim. If the individual does not respond within 30 days or does not accept your decision you should write to them formally refusing the claim. If the individual does not accept your decision they have 30 days within which to send you an appeal. Once they have appealed you may offer a review or the customer can request a review by HMRC. Alternatively they may appeal to the First-tier Tribunal - see ‘Appeals Review and Tribunals Guidance’ (ARTG) for more information about what to do if you receive an appeal.
Claims carried forward or issued before tax year
This guidance is relevant to non-SA individuals only, as SA individuals will always make formal claims in their tax returns to cover claims carried forward automatically or put into codes issued before the start of the tax year.
Legally, claims carried forward automatically, or incorporated into the code before the start of a tax year on the basis of preliminary information given by the individual, do not become final until 22 months after the end of the tax year. HMRC can enquire into such claims at any time up to 5 years 10 months after the end of the tax year.
This position will continue to apply where
- A code for one tax year is simply applied for the next year and the individual has provided no information for the later year
- You discover at a later date that the adjustments for claims in the code were not due or the amounts were excessive
- You discover that any preliminary information given by the individual was incomplete or misleading
However, outside of these cases, once 22 months after the tax year has elapsed
- Do not issue tax returns or other forms as a matter of routine to check claims details in codes for the tax year
- Look only at cases where you have information which suggests there has been incomplete disclosure or fraudulent or negligent conduct
These procedures are intended to give individuals who do not normally get tax returns the same finality arrangements that apply to those who do get returns.
Claim included in return
Where a claim is included in a return HMRC may
- Use the normal SA enquiry procedures for returns to check the validity and accuracy of the claim
- Check the claim on its own, or include any such enquiry in a general review of the whole return
Claim not included in return
As for returns, HMRC has a legal right to make enquiries into the accuracy of any claim and as with returns, a ‘process now - check later’ scheme will apply to any claim not in an SA return. The scheme will apply to any claim made in a tax year where the in-year code gives effect to the claim by a PAYE coding adjustment.
HMRC policy is to keep PAYE codes as accurate as possible. They should not be adjusted on receipt of a claim unless relief is due. Claims should be considered in the normal way to decide if relief is due. You should take care however when subjecting a claim to closer scrutiny to avoid opening an inappropriate enquiry.
Enquiries: What is an enquiry
If you receive anything in writing from an individual about a claim and a possible alteration of a code, with sufficient information to enable you to process the claim, but you decide to ask questions before amending the code, you should formally advise the individual you are enquiring into the claim.
‘Sufficient information’ is enough information for you to know which allowance or relief is being claimed and in what amount.
EH945 gives guidance on letters for opening enquiries for both represented and unrepresented individuals.
Enquiries: What is not an enquiry
If an individual telephones or makes a call in person about their claim and questions are asked or further information obtained to decide if the relief is due, this does not count as an enquiry.
If you decide relief is due
- Amend the code and take no further action
If you decide relief is not due and the individual does not accept this
- Ask the individual to make a written claim and then open an enquiry as explained below
If a written claim is received but it is incomplete because information needed to quantify the claim is missing and you cannot process it, a request for information is not an enquiry. For example, an individual may write in to claim the Married Couple’s allowance but omit to tell you the date of marriage. A request for the date is not an enquiry into the claim.
In-year claims and claims in returns
In-year claims, or claims made in a return issued shortly after the end of a tax year, will all normally become final at the same time. That is, at the first anniversary of the 31 January filing date after the end of a tax year (almost 22 months after the end of the tax year) unless an enquiry has been opened.
Once you have accepted a claim following an enquiry you cannot revisit the decision (except for adjusting provisional amounts) unless you subsequently
- Get further information which leads you to believe you can make a discovery, in which case you should refer the case to a technical caseworker
- Become satisfied that there has been fraudulent or negligent conduct on the part of the individual
So if, for example, you have enquired into a claim for 2005-06 and it is repeated in the SA return issued in April 2006 you cannot enquire into that aspect of the return (other areas of the return are not affected). However, if you have granted the claim without an enquiry but subsequently decide the decision was wrong you may open an enquiry provided it is opened before 31 January 2008.
Where it is not an SA case the matter can be dealt with as a normal enquiry into a claim not in a return. However, if the individual has been asked to, or will be asked to, self-assess for, say 2007-08, any decision as to whether or not to open an enquiry should be made as part of the general decision as to whether or not to open enquiries into the SA return.
When a claim is received
- Examine it to decide whether or not you consider relief is due
- Amend the code if you consider the claim is correct
- Give provisional relief in the code where the exact amount cannot be determined until after the year end (for example, the actual amount of interest paid in a year)
If a provisional code is given
- An SA individual will subsequently provide claims information in the return for the year
And this will be taken into account in the calculation of the self assessment
- A non-SA individual should be asked to provide the correct amount when it is available so that you can take this into account in any informal calculation that you issue for the year
Updating the PAYE code
The code must be updated in all cases (except for CY-1 or earlier leavers) after a return is captured. Further information can be found in subject ‘The coding (integrity) check’ in section ‘Individuals Returns’ in the ‘Returns’ business area of the Self Assessment Manual.