PAYE13130 - Coding: coding: general principles: potential underpayments (PUPs) and In Year Adjustments (IYAs) in SA cases

Potential Underpayments (PUPs) are no longer coded out in SA cases. Instead they are taken into account in the SA calculation for that year.

Where new potential underpayments are calculated for live Self Assessment cases after annual coding but before the end of the tax year, the system will cancel the potential underpayment to ensure it is not included in the CY+1 tax code.

When a PUP is calculated or amended, an explanation is printed on the form P2. For examples of the text that will appear on the P2 in SA cases see PAYE11020.

Cases moving into SA before annual coding main review

If the SA indicator is set on the PAYE Service record before Annual Coding Main Review takes place in early January, any CY PUP will not normally be coded out in CY+1.

Where a PUP was created before the SA indicator was set, the individual will have been told on the P2 that it would be coded out. You will need to advise them that the PUP will now be collected through the SA balancing payment.

Cases moving into SA after annual coding main review

If the SA indicator is set on the PAYE Service record after Annual Coding Main Review has taken place in early January, any CY PUP will already have been coded out for CY+1. If the individual objects, remove it from the code.

Cases moving out of SA before annual coding main review

If the SA indicator is deleted from the PAYE Service record before Annual Coding Main Review, any CY PUP will be automatically coded out for CY+1.

Where a PUP was created before the SA indicator was deleted you will need to advise them that it will be coded out.

Cases moving out of SA after annual coding main review

If the SA indicator is deleted from the PAYE Service record after Annual Coding Main Review, revise CY+1 to code out any PUP.

Where a PUP was created before the SA indicator was deleted you will need to advise them that it will now be coded out.

In Year Adjustments

From 2 July 2017, when we amend a customer’s code we will carry out a full calculation for the year.  Where extra tax is due the new code will include an In Year Adjustment (IYA) and In Year Adjustment Restriction (IYAR) to collect the extra tax over the remaining weeks or months of the tax year. The tax code will be operated on a week 1 or month 1 basis. This should mean that most of our customers pay the right tax and will not be overpaid or underpaid at the end of the tax year.

On the form P2, an In Year Adjustment and In Year Adjustment Restriction are referred to as estimated tax you owe (this year) and less adjustment fo estimated tax you owe (this year).

From the above date we will not calculate any further Potential Underpayments (PUPs) in tax codes.  We will refer to the extra tax due as an In-Year Adjustment (IYA) and the coding restriction will be described as In-Year Adjustment Restriction (IYAR).

Where an In-Year Adjustment (IYA) arises in a SA case, we will include an In Year Adjustment Restriction (IYAR) in the code to collect the IYA over the remainder of the tax year.  If we are not able to collect the whole amount of the IYA in CY, the balance will not be carried forward to CY+1 in SA cases, instead it will be taken into account in the SA calculation for that year.