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HMRC internal manual

PAYE Manual

Reconcile individual: end of year reconciliation: non UK residents-S810 and S811 ITA 2007 (formerly S128 FA 1995) cases

Section 810 ITA 2007 legislation can only be applied when the individual was non resident in the UK for the whole of the tax year. This legislation does not apply in the tax year of arrival in the UK or departure from the UK.

A non resident is generally liable to UK taxation on all of their UK income but where it is more beneficial to them Section 811 ITA 2007

  • Limits (by disregarding certain types of income) the income on which they are liable to UK taxation
  • Removes their personal allowance

The disregarded income for the purposes of S811 is as follows

  • State Pension
  • Widows Pension
  • Bank / building Society Interest
  • UK Dividend Income
  • National Savings Income
  • Purchased Life Annuities
  • Unit Trust Income

Cases where S811 is known to be beneficial should already have the S128 indicator set on them but where this is not so and, when new cases are found, you will need to set the indicator yourself.

For the purposes of reconciliation, setting the S128 indicator alone will not prevent a case from being automatically reconciled by the PAYE Service and to prevent this, the Inhibit Automatic Reconciliation indicator (PAYE93015) in addition to the S128 indicator will need to set on the customer’s record. This will allow the case to be manually reviewed so that the most beneficial Tax calculation (that is one taking account of S811 and one not taking account of it) is issued to the customer.

  • The result is an overpayment / underpayment within tolerances, the year will be cleared as ‘Reconciled- Balanced’ and a Tax Calculation (P800) will not be issued

For cases where items two and three above apply and where you are manually reviewing a year to which S811 applies, you will need to do two calculations for the year, one to include the disregarded income / allowances and one to exclude them, to determine the most beneficial one to be issued. To do this

  • View the Reconciliation Summary screen for the year concerned to determine whether or not a tax calculation (to include the disregarded income / allowances) has already been undertaken. If

    • It has not, reconcile the year to produce a tax calculation
    • It has, continue as detailed below
  • Take a print of the Tax Calculation screen and cancel out of it using the [Cancel] button
  • Review the income and allowances in the calculation to determine those to be excluded when taking account of Section 811
  • Take screen prints of the IABD screens that will need to be changed to exclude the income / allowances
  • Remove the income / allowances concerned from within the IABD screens and reconcile the year again
  • Compare the results of the new tax calculation with the screen print taken of the original (non-Section 811) calculation

Where the

  • New (Section 811) calculation is most beneficial

    • Review and if required update the reasons for the over / underpayment automatically selected by the system
    • Approve the calculation for issue
  • Initial (non Section 811) calculation was most beneficial

    • Cancel out of the new calculation using the [Cancel] button
    • Re-input into IABD the income / allowances removed from the original calculation and reconcile the case. The resulting tax calculation should be the same as the original calculation. In case addition
    • If required (that is if you are reconciling the year for the first time) review the calculation, select the appropriate reasons (up to 5) as to why the customer is over / underpaid and approve the calculation for issue

For cases where you have undertaken the S811 comparison on receipt of a customer enquiry, where the

  • New S811 calculation is beneficial, you should put a free hand note on it to explain that it replaces the original (none S811) calculation
  • Old S811 calculation is beneficial, respond to the enquiry (by letter) explaining the situation