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HMRC internal manual

Self Assessment Manual

From
HM Revenue & Customs
Updated
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Returns: individuals returns: returns which include a PAYE source of income

General PAYE matters

Notes:

1. If taxpayers approach you with a PAYE problem before filing a self assessment return, for example because they do not have or do not agree with a form P60, you should always advise them that the return should be filed on time, using a best estimate if necessary. You can assist in arriving at a best estimate if details are provided of income and allowances but you should always say that the estimated figure may be looked into by HMRC at a later date
   
2. Where the number of weekly pay days in the year exceeds 52 for weekly paid employees, the effect of the operation of PAYE is to give an extra week’s allowances. Similar adjustments are made for other cases where the number of pay days exceeds the norm (more than 26 fortnightly or more than 13 four-weekly). However, these adjustments do not apply for Self Assessment purposes. Self assessments must be made only on the statutory basis. That is, the actual receipts of the year must be assessed and the normal allowances and deductions should be given

Further guidance on this matter is available at SE42420 (2002/03 and earlier years) and at EIM42420 (2003/04 and later years).

Review of PAYE Service functions

Coding Adjustments

To capture a return for a taxpayer with a PAYE source of income you need to obtain the details of two types of coding adjustment where applicable

  • Previous year’s underpayments coded out for the SA year
  • Potential underpayments arising in the SA year and coded out for a later year

2003/04 and earlier

The PAYE service Tax Code History screen and Financial Event Summary screen should be used to establish any amount affecting liability for the SA year, and the details must then be entered during capture.

2004/05 onwards

In all cases the computer will initially show the relevant details extracted from PAYE in view boxes 7 and 8 of the Tax Calculation (18.1 and 18.2 for years to 2006/07) or view boxes 2.6A and 2.6B (Short Tax Return (SA200)). These details will have been extracted from PAYE near the end of the tax year for which the return is being captured. For example, details in respect of 2007/08 will have been extracted in March 2008. Where the information held on PAYE is 0 (zero), then the computer will show 0 (zero) in the relevant view box at 7 or 8 of the Tax Calculation or 2.6A and 2.6B (SA200).

For Revenue Calculation taxpayers, you should enter in the capture boxthe details already extracted from PAYE and shown in the view boxes. For Self Calculation taxpayers, you should enter in the capture box either the details already extracted from PAYE, and shown in the view boxes, or the taxpayer’s figures.

It is important to review the PAYE Service carefully when establishing the amounts to be captured. You should check that the amount to be captured is no greater than the amount of underpayment included in the code for the return year. You may also have a case where you have cleared an earlier year following the end of the year in which the underpayment is coded (the return year) and the correct amount of underpayment that should have been coded is now reduced. It is this reduced amount that should have been coded which you should capture in box 7 of the Tax Calculation (SA100) or 2.6A (SA200).

When reviewing potential underpayments arising in the SA year and coded out in a later year, the potential underpayment may have been paid voluntarily by the taxpayer, (a voluntary direct payment (VDP)). Therefore the amount will not have been coded out in a later year. The potential underpayment arising (and paid), must still be entered during capture.

A potential underpayment arising in the SA year which has not been coded in a later year or which has not been paid voluntarily by the taxpayer should not be captured.

Notes:

1. Tax Calculation Summary boxes 7 and 8 (SA100) are only required to be completed by Self Calculation taxpayers.
   
  For Revenue Calculation taxpayers you must, for 2003/04 and earlier, enter any details from the PAYE Service Tax Code History screen in box 18.1 and Financial Event Summary screen in box 18.2, the potential underpayment status should show ‘coded’. For 2004/05 onwards you must enter in the capture boxes at 7 and 8 of the Tax Calculation (18.1 and 18.2 for years to 2006/07) or boxes 2.6A and 2.6B (SA200) the details already extracted from the PAYE Service and shown in the view boxes. This is not a repair as the boxes are not required to be completed by taxpayers requesting Revenue Calculation.
  Note: Although this is not treated as a repair the time limit for entering or amending amounts in these boxes is subject to the same 9 month time limit
  For Self Calculation taxpayers you must, for 2003/04, check the details in the PAYE Service Tax Code History screen and Financial Event Summary screen. If the details are different to those entered on the return, or the return details are missing, you must repair the return amounts and explain the revision to the taxpayer using a Customer Service Message (SAM121435). For 2004/05 onwards you should enter in the capture boxes at 7 and 8 of the Tax Calculation (18.1 and 18.2 for years to 2006/07) either the details already extracted from PAYE, and shown in the view boxes, or the taxpayer’s figures. If the details captured are different to those entered on the return in TCS 1 boxes 7 and 8, you must repair the return amounts and explain the revision to the taxpayer using a Customer Service Message.
2. If a potential underpayment from the return year is coded the following year, the return when processed treats the potential underpayment as paid in full. If on processing a return, which includes a potential underpayment, a repayment arises you must not refuse the repayment solely on the grounds that the potential underpayment has not yet been collected.

Tax Already Refunded

You need to consider if an in-year repayment has been made so you need to check the SA Notes and the PAYE record to obtain details of any amount of tax already refunded for the year of the return. This can be viewed in SA notes where the repayment was made by Free Standing Credit or on the PAYE record under Financial Events Summary.

Compare the amount entered on the return with information shown on the screen. If the details are different to those entered on the return, or the return details are missing, in both Self Calculation and Revenue Calculation cases you must repair the return amount and explain the revision to the taxpayer using a Customer Service Message.