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HMRC internal manual

PAYE Manual

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HM Revenue & Customs
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Coding: coding: general principles: removal of PAYE service cases from SA - SA refinement automatic coding

When a CY-1 tax return is captured the SA computer system will identify PAYE Service / SA cases suitable for automatic removal from SA. It will do this by comparing the CY-1 return with a set of specified criteria. Further information can be found in the Self Assessment Manual in section ‘Maintain Taxpayer Record’ in the ‘Records’ business area.

The PAYE Service will look at the coding items from the individual’s SA record and for CY+1 where an entry is present for the same source, no change will be made. If there is no entry in CY+1, the PAYE Service will look at the CY coding record. Where an entry is present no change will be made. The system assumes that a clerical review has taken place, for example because the source ceased in CY, no entry appears in CY+1.

Where there is no entry present in CY+1 or CY, the amount from the individual’s SA record will be included in the coding record for CY+1. Where there is no entry present for job expenses or professional subscriptions in CY+1 or CY then a work item will be produced for a clerical review.

The work items are

134 - SA Refinement - expenses due in code Generated when job expenses are present on the SA return but there is no entry present on the PAYE Service coding record in CY+1 or CY. The Action Guide is at PAYE13136
   
135 - SA Refinement - Professional subscriptions due in code Generated when professional subscriptions are present on the SA return but there is no entry present on the PAYE Service coding record in CY+1 or CY. The Action Guide is at PAYE13137

Where relief for a payment is given for extending the basic rate band, for example personal pension relief, the SA computer system will check that higher rate liability occurs on an amount equal or more than the payment made. If not, the SA computer system will provide the amount by which the basic rate is extended, rather than the total payment.

As a result of the automatic removal from SA there may be an increase of enquiries after the Annual Coding run has taken place. This may be because of items included in the CY+1 code for the first time for example

  • Reliefs due to give higher rate relief
  • Adjustments to recover the additional tax on savings income

The table below gives further information on specific income and payments from the SA tax return

Untaxed Interest (Boxes 10.1 and 10.8) Untaxed interest included in CY+1 code
   
Taxed Interest and Dividends (Boxes 10.4, 10.7, 10.11, 10.14, 10.17, 10.20, 10.23 and 10.26) Gross amount from all boxes added together, but where the individual is liable at the basic rate, no higher rate adjustment amount will be sent to the PAYE Service. Savings income taxable at higher rate included in the CY+1 code for individual liable at higher rate as a higher rate adjustment
Other Taxable Income (Box 13.3) If no tax has been deducted, there is no entry in box 13.2, the SA computer system will add the amount in box 13.3 to any amount in box 1.10 of the employment page. The PAYE Service will look for coding entries described as Commission, Other earnings (earned income), Other earnings or Part time employment. Only if none of these are present will Other earnings (earned income) be included in CY+1
Retirement Annuity Relief (Box 14.1) Retirement annuity payments included in CY+1. Many individuals confuse retirement annuity payments and personal pension payments so the PAYE Service will first look for retirement annuity payments CY+1 and CY and if not present will look for personal pension relief in CY+1 and CY. Only where neither is present in the code will retirement annuity payments be coded in CY+1
Personal Pension Relief (Boxes 14.6 and 14.11) Personal pension relief included in CY+1 for higher rate individual at the source against which the code is operated
Other Contributions (Box 14.10) Payments shown here may not be regular or continuing so details will not be passed to the PAYE Service
Gifts to Charity (Box 15A) Gift aid payments included in CY+1 for higher rate individual at the source against which the code is operated. Amount will be box 15A.1 less ‘one-off’ gift in 15A.2
Tips (Employment page box 1.9) Tips included in CY+1 from maximum of two employment pages
Other Payments (Employment page box 1.10) Other earnings (earned income) included in CY+1 from maximum of two employment pages. Total of box 1.10 plus amount in box 13.3 (see Other Taxable income (Box 13.3) above)
Professional Fees and Subscriptions (Employment page box 1.34) Professional subscriptions - where no entry in CY+1 or CY clerical review required
Other Expenses and Capital Allowances (Employment page box 1.35) Job expenses - where no entry in CY+1 or CY clerical review required

A work item will be generated where the PAYE Service is unable to deal with the information provided by SA. The work item is

079 - Information from SA - No trace individual Generated when information from the Self Assessment return cannot be matched to an individual’s record. Action guide taxollow action guide tax40192 WMI079 (AA)
   

Automatic coding will only apply in the circumstances described above. Where the individual objects to a non-PAYE source of income (for example untaxed interest or savings income taxable at higher rate) included in the PAYE code, refer them to the letter SA251 (letter sent to individual advising removal from SA). Explain that the coding will recover the extra tax due if we do not send an SA tax return. If the income is removed from the code then we will need to send SA tax returns each year.

If the individual prefers to complete SA tax returns, you will need to reactivate the SA record, set the ‘Automatic Closure Inhibited’ signal on SA and review the coding and indicators on the PAYE Service.