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HMRC internal manual

PAYE Manual

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HM Revenue & Customs
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Coding: coding: general principles: married couples: date of marriage prior to 5 December 2005

There are special rules you need to follow when dealing with a husband or wife.

Specific areas where you need to take care include

  • Coding in the year of marriage
  • Transferring surplus allowances between spouses
  • Separation
  • Death of a spouse

The remainder of this subject is presented as follows

Full instructions are included at PAYE10010.

Note: Check if the wife is in an older age band than the husband for age-related allowance purposes. If she is, review the age-related allowances due to him. If reduced Married Couple’s allowance is due for CY (the year of marriage) or CY+1, make sure the date of marriage is recorded on the record before submitting the code calculation.

Where the wife is in an older age band than the husband, NPS will automatically calculate any reduction to the Married Couple’s allowance which is included in the husband’s tax code as appropriate, according to the husband’s estimated income or ‘Adjusted Net Income’ (ANI).

Cases may arise where an individual is entitled to receive the Married Couple’s allowance by virtue of their spouse’s date of birth, but does not qualify for age-related personal allowances, due to their own date of birth. Where a younger spouse receives a reduced amount of Married Couple’s allowance as a result of the level of his income, if the case is not appropriate to SA, you must ensure the ‘Inhibit Automatic Reconciliation’ is set, see PAYE93015.

This is to ensure the reconciliation can be manually calculated. NPS will not automatically calculate any reduction to the allowance when the tax year is reconciled.

Coding for year of marriage

In the year of marriage the Married Couple’s allowance due is reduced by one twelfth for each complete tax month before the date of marriage. The system will calculate the apportioned amount using the date of marriage on the record.

Review the record and check if any other allowances or deductions need changing as a result of the marriage, for example, a bereavement benefit may no longer be due on remarriage.

Death of either spouse

The death of a person’s spouse will be a very trying time for them. You can help by being sympathetic and dealing with their tax affairs as quickly and efficiently as you can.

From April 2001, bereavement benefits have been payable to men and women. Details of these benefits are in the Employment Income (EIM) Manual at EIM76170 onwards.

Amend the marriage details on the system; refer to action guide tax40006 for more details on dealing with deceased cases.

Form 18 elections

Where a valid election is received take the following action

  • Record receipt of the form on the income, allowances, benefits and deductions area (action guide tax40002)
  • Acknowledge the election on Form 18 (Acknowledgement). Address this to the wife if she has elected for half of the allowance or to the couple if it is a joint election
  • Using the information on Form 18 , make a Contact History note on the spouse’s record of the election details
  • Where this is a file case, file the election in the permanent notes folder
  • Where this is not a file case, make a note on Contact History on the individual’s record to include

    • Date of receipt of Form 18
    • Whether the election is for half or the full amount of the allowance
    • First year the election applies
    • Date Form 18 (Acknowledgement) and date notification recorded on the spouses record

Transferred allowances are recorded on the system by using the coding entries Married Couple’s allowance to wife and Wife’s Married Couple’s allowance. Remember that

  • Except in the year of marriage, the only permitted entries are one half or the whole of the minimum of the Married Couple’s allowance for the year
  • For the year of marriage, you may enter one half or the whole of the apportioned Married Couple’s allowance due only if the date of marriage is held on the record. At the same time you should enter the correct amount for CY+1
  • The amounts in the CY coding will be carried forward to CY+1 unless you enter a different amount

Even if a Form 18 election is in force, either spouse can still transfer to the other spouse any surplus Married Couple’s allowance. Usually the notice will be given after the end of the year, when details of income are known.

Surplus Married Couple’s allowance transferred to the wife is included in coding by entering an amount against

  • Surplus Married Couple’s allowance transferred to wife
  • Surplus Married Couple’s allowance from husband on the wife’s record

Whenever a transfer of allowances is made there are certain indicators that need to be set to make sure the case is reviewed see below.

A Form 18 election cannot be withdrawn in-year even if the couple has separated.

Jointly held assets

Married couples often have investments and bank accounts held in their joint names. Often it is hard to decide how to split the income between them. The general rule is that jointly held assets are split equally between spouses.

In certain circumstances they can ask to be taxed on their actual entitlement to income from the joint asset. To do this they need to make a `declaration’. They can do this on form 17 and you should issue this form if appropriate.

Make sure you make a Contact History note on the other spouse’s record of any decisions you make.

Married Couple’s allowance

A man (but not a woman unless an election has been made for 2006-2007 onwards, see below) can claim the Married Couple’s allowance for a year of assessment, if in that year

  • He is married
    And
  • His wife lives with him
    And
  • At least one of the spouses was born before 6 April 1935

For a couple who married before 5 December 2005, the husband will continue to receive Married Couple’s allowance. From tax year 2006-07 couples who married before 5 December 2005 will be able to elect instead for the spouse with the higher income to claim Married Couple’s allowance under the new rules. This rule change provides existing claimants with increased options. There is no financial advantage to be gained from this. Indeed it is possible the couple may reduce their overall entitlement to Married Couple’s allowance if the wife has a higher income and exceeds the age-related income limit.

Under the old rules it is still the husband’s adjusted net income (ANI) that determines if there is any reduction in the age-related level of this allowance even if part or all of the minimum amount of the allowance has been transferred to his wife.

An election for the new rules to apply from 2006-07 or later years, once made, cannot be revoked. An election must be made before the start of the first year for which it is to apply.

From 5 December 2005, civil partners have similar rights and Married Couple’s allowance is available to married couples and civil partners. From that date civil partnerships, and also new marriages, meeting the age criteria will, on claim from the spouse or civil partner with the higher income, receive the allowance. See PAYE13110.

Note: Entitlement to Married Couples allowance continues even if a spouse goes in to residential care.

Provisional transfer of surplus allowances

A husband’s primary employment source record may sometimes provisionally transfer a surplus of allowances to the wife’s record. Form 575 is the designated form for giving notice, however a letter can be accepted.

In these cases

  • The husband’s primary source must confirm the figure each year
  • The wife’s record must only continue a provisional transfer of surplus allowances if they have permission from the husband’s primary source record

They are shown on the coding screen for

  • The husband’s record as Married Allowance Transferred (means that the husband will get a Form 575 (T) each year)
  • The wife’s record as Surplus Married Couple’s allowance from husband

Note: In the scenario that the husband has a primary and secondary record, the system will first set all the surplus allowances against the husband’s secondary record. If the secondary record will not use all the surplus allowances then in the Edit Employment Allocation screen enter the amount of allowances required against the secondary record to cover the secondary estimated pay, recalculate the code and the system will calculate the surplus married allowance transferred and record this on the married allowance screen in income, allowances, benefits and deduction.

Separation

The breakdown of a marriage is likely to be a difficult time for both the husband and the wife. Try to sort out the taxation problems connected with it as quickly and sympathetically as you can.

When a couple first separate you will need to find out the facts such as when they separated and new addresses. In some cases you may also need to establish who has responsibility for any children or maintenance arrangements. If you do not have the information you should send a letter if necessary.

Indicators present when surplus allowances transferred

Where a husband’s Blind Person’s allowance is transferred to his wife, set the Manual Code indicator with the reason BPR transfer and add a note in Contact History `Manual code Blind Person’s allowance transferred to wife’.

Where a wife’s code includes her husband’s Blind Person’s allowance and no record is held for the husband, set the Manual Code indicator with the reason BPR transfer and add a note in Contact History `Manual code husband’s Blind Person’s allowance in code’.

Where a wife’s Blind Person’s allowance is transferred to her husband, set the Manual Code indicator with the reason BPR transfer and add a note in Contact History `Manual code Blind Person’s allowance transferred to husband’.

575HUS set where a wife’s code includes her husband’s Married Couple’s allowance and the husband has no record, means that the husband will get a form 575 (T) each year.

Transferring allowances between spouses

In certain circumstances you can transfer allowances between the spouses.

To the wife from the husband

An election can be made for the wife to receive one half, or the whole, of the basic Married Couple’s allowance. This is regardless of the level of the husband’s income. However, the age-related additions cannot be transferred.

An election is made on Form 18 and remains in force until amended or withdrawn.

Any surplus of the Married Couple’s allowance or husband’s Blind Person’s allowance which is unused, because the husbands income is too low, can be transferred to the wife if the husband gives notice that he wants to do this. Form 575 is the designated form for giving notice. However it is not compulsory and a letter can be accepted.

From the wife to the husband

Any surplus of the wife’s share of Married Couple’s allowance, transferred through an election on Form 18, but which is unused because her income is too low, can be given back to the husband.

Any surplus of the wife’s Blind Person’s allowance unused because her income is too low, can be transferred to the husband.