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HMRC internal manual

PAYE Manual

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Reconcile individual: end of year reconciliation: migration issues

When introduced, end of year information previously recorded on COP migrated to the PAYE Service. Information migrated in respect of how an individual’s liability was cleared, for example overpaid / underpaid, migrated to the Reconciliation and Accounting Functions and in most instances, the details shown in the Service fully reflect those previously held on COP. However, due to the circumstances particular to a case or, where a year on COP was still ‘open’ at migration this was not always the case. Information as to where this is so within Reconciliation is given below.

The items below contain further information to help you deal with known Reconciliation issues. Guidance on areas where Accounting is affected by migration issues can be found at PAYE98025.

COP Open cases

To allow cases for CY-1 to be worked within the PAYE Service, a list of open cases at migration was obtained and the open years concerned were migrated as ‘Reconciled - Balanced’. The cases have a Contact History note on them of ‘Open years on COP marked as cleared Z before transfer to the PAYE Service’. The open case list is held by a specialist unit who will be responsible for clearing them and you should not attempt to clear them yourselves in day to day work.

Cessation repayment claim cases: 2009-10

Where a cessation repayment case for 2009-10 was cleared on COP prior to migration, the in-year reconciliation status for the case displayed in the Reconciliation Summary screen will be Reconciled - Overpaid. This is for migrated cases only and moving forward any such cases cleared on the PAYE Service will show an in-year status of ‘Cessation’.

Reviewing 2007-08 and earlier

All cases migrated from COP to the PAYE Service were reconciled up to and including 2007-08 prior to migration and you should not look to review earlier years as a matter of course in day to day work. We will however, need to review 2007-08 and earlier where the customer specifically requests it or where the review of earlier years is necessary for the purposes of working

  • An ECS A19 claim
  • A complaint by the employee that employer error resulted in an underpayment
  • Any other type of complaint

In addition to applying this instruction generally, it should also be applied to underpayments and overpayments which are identified as a result of the introduction of the PAYE Service and the merging together of separate records into one customer record on the PAYE Service (for example where two records were held and full personal allowances were given at both sources).

Where Reconciliation Summary shows a result for a pre-PAYE Service year and when you drill down into the Back Years Processing screen there is an actual result but the date of the reconciliation is not showing on Reconciliation Summary, this is because of incorrect entries on COP Clearance Summary (CS) fields or because of a working sheet being prepared on COP. This will have created an Accounting event which will carry forward into a subsequent years reconciliation. However, the reconciliation has not actually been issued to the customer. Rebuilding the year will overwrite the incorrect figure and will establish the correct result.

Underpayments at April 2008

Where an underpayment was collected during 2007-08 or earlier by inclusion in the customer’s PAYE code, in a small number of cases a payment record (receipt) for the amount concerned was not created when details were migrated to the PAYE Service. As a result the PAYE Service treats the underpayment as still being outstanding at April 2008 and brings it forward into the 2008-09 tax calculation. The issue effects underpayments brought forward at April 2008 only and where a customer’s record shows such an underpayment, you will need to review the latest code issued in each year up to and including 2007-08 to see whether it is genuine or, whether it has already been collected through coding. Where the underpayment

  • Has not already been collected through coding, it is genuine and you will need to leave it in the 2008-09 calculation
  • Has already been collected through coding, it is one of the erroneous ones caused at migration and you will need to remove it from the customer’s record (PAYE93036) before you continue to review 2008-09

Reconciliations from draft calculations

Where a working sheet was prepared on COP but not issued, migration is incorrectly creating a reconciliation result from the draft calculation and the Reconciliation Summary screen will show the year as Balanced - Underpaid or Balanced - Overpaid depending upon the result of the draft calculation. You will be able to identify the cases concerned as the associated Financial Events Summary screen will (correctly) not show details of the underpayment / overpayment arising from the draft calculation. Where you identify any cases affected by this issue in day to day work, you should not take any further action to clear them - the cases were included in the list of open cases migrated to the PAYE Service and they will be reviewed and cleared as part of the COP open case clearance strategy.

Reconciliations from manual calculations

Where a manual tax calculation was issued on COP, in a small number of cases the year was incorrectly cleared ‘Z’ or ‘N’. The cases concerned have migrated to the PAYE Service to show the correct reconciliation status (for example Reconciled - Overpaid) but, incorrectly do not show an associated entry in the Financial Events Summary screen to show how the underpayment / overpayment was cleared. Where you identify a case affected by this issue in your day to day work and you require this information, you should review Contact History (to view the COP E notes migrated to the PAYE Service) to determine how the underpayment / overpayment was cleared.

National Insurance Benefits: first year 2008-09

As part of the migration strategy, all National Insurance Benefit (NIB) details in respect of 2008-09 were migrated with a frequency of payment of ‘annual’. This will be correct for cases where the customer was in receipt of benefits prior to 5 April 2008 but for cases where benefits commenced during 2008-09 the benefits included in the 2008-09 tax calculation will be incorrect. Where you become aware of this in day to day work, or as a result of an enquiry about a tax calculation that has already been issued you will need to proceed in accordance with PAYE93036 to rectify matters.

SA underpayments

Although the Reconciliation Summary screen going forward will only display an amount underpaid where the case has been reconciled on the PAYE Service, for migrated years it will also display the amount of an SA underpayment where the amount concerned was collected through the customer’s PAYE code. For example, for a case where the customer is SA throughout, where an SA underpayment arising in 2005-06 was coded out in 2006-07 both years will be cleared as Reconciled- SA and the amount of the SA underpayment will display in the amount field on the Reconciliation Summary screen for both 2005- 06 and 2006-07.

Do not use details in the Reconciliation Summary screen to determine how an SA underpayment has been collected through the PAYE Service. Details of both migrated SA underpayments and SA underpayments going forward are available in the Financial Event Summary and Tax Code Details screens and you should review these screens for the relevant year(s) where you need further information about a particular underpayment.

Deceased cases - Reconciliation Summary

Where reconciliation shows a pre-PAYE Service year as overpaid but when you drill down in to the Back Years Processing screen the actual result is an underpayment, this is because of incorrect entries on COP Clearance Summary (CS) fields. Where the liability to date of death for a COP year was an underpayment, calculations had to be issued manually to the capacitor and payment requested. As the calculation was issued manually no accounting events have been created. In some cases the CS screen was incorrectly noted with ‘RZ’ instead of ‘A’. Where this has happened the data migrated to the PAYE Service shows the year as overpaid on the Reconciliation Summary screen but underpaid in the Back Years Processing screen.

Coded out underpayments in current year

In cases where a sub-source coding notice has been issued later than a main source coding notice (which included an underpayment), the amount coded out will not be populated in Accounting - a payment record (receipt) for the amount concerned was not created when details were migrated to the PAYE Service.

As a result

  • An outstanding underpayment is shown in Accounting
  • Any subsequent main source coding notice issued during this year will not include the underpayment

This issue effects underpayments brought forward at April 2009 only and where a customer’s record shows such an underpayment. When amending a primary source code and the result is not as expected

  • You will need to review the previous code for a coded out underpayment (this underpayment will not be able to be put back into the CY code once removed)
  • Check this underpayment is shown in Accounting - Financial Events Summary with an ‘outstanding’ status - to ensure it gets picked up for the following year