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HMRC internal manual

PAYE Manual

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HM Revenue & Customs
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Reconcile individual: in-year reconciliation: unemployment repayments

Although a person claiming Jobseeker’s Allowance or Employment and Support Allowance can claim an in-year repayment of tax in pension lump sum (formerly known as trivial commutation payments) cases (PAYE94045) and, where they have received a redundancy payment that has been subjected to higher rate tax (action guide ‘Request for an in-year repayment on receipt of redundancy payment’ available on the Personal Tax Operations Guidance gateway), they cannot routinely claim a repayment of tax for any income tax year covered by the benefit claim, whether or not Jobseeker’s Allowance or Employment and Support Allowance is received.

Other than in the exceptions above, during a claim to Jobseeker’s Allowance or Employment and Support Allowance, income tax repayments are not allowable for any reason for that year. Reasons may include

  • allowance being lower than free pay for the code in use
  • Budget increase in coding
  • increased allowances arising from a change in personal circumstances
  • return to a cumulative code
  • the total taxable income before allowances are set off exceeds £100,000

A claim to tax repayment is allowable if no claim to Jobseeker’s Allowance is made, but a person registers with the Benefit Office for other reasons. For example, a person may register to obtain credits for National Insurance contributions.

If the customer satisfied the SA criteria in that the total taxable income, before allowances are set off, was £100,000 or more at the date their employment was terminated you should,

  • set up or reactivate the SA record in accordance with action guide ‘Potential SA case’ available on the Personal Tax Operations Guidance Gateway.
  • advise the customer, using OCA177 that no in-year repayment can be made because they are now an SA taxpayer.

Any PAYE repayment due to someone claiming Jobseeker’s Allowance on the grounds of unemployment or Employment and Support Allowance on the grounds of incapacity, is made through the Benefit Office

  • At the end of the claim

Or

  • After 5 April, if this is earlier

Claiming unemployment repayment

An initial claim must be made on form P50. See guidance included within action guide ‘Deceased Return Capture’ available on the Personal Tax Operations Guidance Gateway.

The P50 tells claimants, who are not claiming a taxable benefit and expect to be unemployed for 4 weeks or more, to fill in the form and submit it together with pay and tax details from their P45.

You may receive a claim from an individual who has been unemployed for less than 4 weeks. In such a case, use your judgement and either make the repayment claimed or explain to the individual why you are not making repayment.

If further information is required to deal with the claim, a P50 (enquiry letter) from OCA can be sent to the individual or their agent requesting the further details.

You should always access the Edit Employments screen to check that the ‘Total Pay and Tax in this employment’ fields are populated. If they are not, you should enter the total pay and tax in this employment in the relevant fields and ensure that the Total Pay To Date and Total To Date fields for the final employment include all previous amounts.

Where there are previous pay and tax details from a previously ceased primary employment, you must deduct these from the ‘Total Pay and Tax to date’ to work out the ‘Pay and Tax in this employment’.

You should do this for all previous primary employments in the year. Where there are concurrent primary employments you will need the P45 Part 1 from each employment before you can deal with the claim.

Where notification is received of a payment made after leaving the income may not have been included within the Pay and Tax for this employment.

Non RTI employers will not issue a further P45, therefore to include these amounts within the reconciliation you should edit the Pay and Tax details within the employment details, see PAYE64010. A Contact History note should be made detailing the original P45 details and the additional payment, see PAYE105020.

RTI employers will submit an FPS with details of a payment after leaving, which will allow these details to be automatically included within the reconciliation.

Note: If as a result of making the unemployment repayment, all the tax deducted to date is being repaid and the individual is making Gift Aid payments, any tax underpaid on the Gift Aid payments will be recovered following end of year reconciliation.

Care should be taken when processing unemployment repayment claims as where a P50 unemployment repayment claim is processed then cancelled, and then processed again correctly, an error message is received ‘unemployment claim was created less than 28 days ago’ and you will not be able to deal with the claim for a further 28 days.

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Subsequent claims

Subsequent claims are made on form P52 which is issued automatically to the individual by the system following the first unemployment repayment claim.  See action guide ‘Further request for unemployment repayment – P52’ available on the Personal Tax Operations Guidance Gateway.

A claimant who wishes to make a claim must

  • complete the form P52 to confirm that unemployment continues
  • submit the form P52 together with Parts 2 and 3 of form P45, issued with the last payable order

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End of year claims

You may receive a claim after the end of the income tax year to which it relates. Deal with it as an unemployment repayment if

  • You receive it within 12 months of the end of the income tax year to which it relates

And

  • The pay and tax have not already been included in an informal calculation

In the Date of Claim field enter 05/04/YYYY (for example a claim for 2008-09 received on or before 5 April 2010 and processed on 12/04/09 - enter 05/04/2009).

You may make the repayment even if the claimant has been employed in the year in which the claim is received.