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HMRC internal manual

PAYE Manual

From
HM Revenue & Customs
Updated
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PAYE operation: incapacity benefit: form P46(IB)

Form P46(IB) is used to notify new and revised awards.

The form shows the

  • Weekly taxable rate of Incapacity Benefit
  • Date of commencement or change
  • Type of award

The types of award are

  • First Award - means a new award
  • Revised Award - means a change in the rate of Incapacity Benefit paid
  • Uprated Award - refers to the CY+1 rate where the form was issued after the annual uprating process has taken place

The rate of Incapacity Benefit can change due to

  • A move from Short Term Higher to the Long Term rate
  • A change in personal circumstances (for example, marriage)
  • Withdrawal of Incapacity Benefit for a period (for example, because the claimant goes into hospital or leaves the UK)

If the tax code is being calculated for the first year of an individual’s period of incapacity benefit, then the following rules will apply

  • Where the tax code is calculated within one month after the date of the first payment, the system will calculate the annual amount due in CY and include this amount in the tax coding. The code will be operated on a non cumulative (week1 / month1 basis) but the system will not calculate an estimated (potential) underpayment. CY+1 code to include Annual Incapacity Benefit
  • Where the tax code is calculated more than one month after the date of the first payment, the system will calculate the actual amount due in CY and include this amount in the tax coding. The code will be operated on a non cumulative (week1 / month1 basis) and the system should calculate an estimated (potential) underpayment. CY+1 code to include Annual Incapacity Benefit

The system calculates the annual amount of IB for CY+1 using the following rules.

If the first day of the tax year falls on a Monday, Tuesday or Wednesday in CY+1 the amount of IB calculated will be

  • 2 weeks x old rate plus 50 weeks x new rate (based on CY rates)

If the first day of the tax year falls on any other day, the amount of IB calculated in CY+1 will be

  • 1 week x old rate plus 51 weeks new rate (based on CY rates)

For example

The IB rates for CY are ‘old’ rate £75.40, ‘new’ rate £80.15 for CY

  • If 6 April falls on a Tuesday in CY+1, IB = (75.40 x 2 weeks) + (80.15 x 50 weeks) = £4158
  • If 6 April falls on a Thursday in CY+1, IB = (75.40 x 1 week) + (80.15 x 51) = £4163

The system uses a similar calculation for CY however the two years over which to take values will be CY-1 and CY.

Note: Where you are including incapacity benefit for the first time after the annual uprating in January then an advisory message will be displayed directing you to recalculate the CY+1 code. In these cases, use the P242 chart to estimate the CY+1 amount and amend the record.

For further information and the action to take with these forms see Action guide tax40247.