Transfer of liability: transfer from SA to PAYE: automatic transfer of balancing payment to PAYE
Since 4 October 2002 balancing payments arising from 2001-02 SA tax returns and later years, captured in the period 6 April to 31 December inclusive, that meet the conditions for transfer, have been automatically transferred to PAYE.
The process also automatically updates the ‘Reconciliation Summary’ screen in the PAYE Service.
This subject is presented as follows
Conditions for transfer
SA tax returns in general
For all SA tax returns, balancing payments are automatically considered by the SA computer system for transfer to PAYE where the following conditions are met
- Balancing payment (that is, balancing charge debit (BCD) and any outstanding payments on account (POA’s)) is £2999.99 or less (including any amounts previously transferred to PAYE for that year)
Return logged and captured by following dates
- Paper returns - logged and captured (using function CAPTURE RETURN only) before 31 December following the end of the return year
- Online tax returns - logged and fully captured before 31 December following the end of the return year
For amended returns
- Where a Schedule Amendment Date is present - that is a taxpayer amendment was received on or before 31 December and the date you use function AMEND RETURN is on or before 31 December
- Where a Schedule Amendment Date is not present, in cases where you have corrected the return - return is logged on or before 31 December and the date you use function AMEND RETURN is on or before 31 December
- Where an online amendment is received on, or before, 31 December
- Return does not include a request not to code the amount
- Return includes either Employment pages, Minister of Religion pages, or entries for ‘Other’ (non-State) pensions or ‘Taxable Incapacity Benefit’
- PAYE link exists
- Deceased signal is not set on SA
- There is not an amount stoodover, either formal or informal for that return year
- There is not an amount remitted for that return year
- The amount to be transferred following amendment is greater than the amount originally transferred
Cases meeting the above criteria will be automatically transferred to PAYE on a daily basis in the period 6 April to 31 December each year.
|1.||The computer system will look at the information on the return or return amendment and will automatically calculate the biggest amount that can be collected through the code. If the actual SA underpayment arising is more than that amount, no part of the underpayment will be coded. If, as the result of a return amendment, an underpayment that is initially too large to be coded is reduced to the extent that it could be collected through the code, then it will be transferred automatically|
|2.||The automatic process will only transfer an amount if it believes it is possible to collect the whole of the underpayment over one year. However, it is only an estimated process. Where the taxpayer appeals against non-coding, you should determine whether the underpayment can be coded out and, where it is possible, use SA function RECORD TRANSFER TO COP to transfer and make a manual update to the Accounting Summary.|
|3.||Where a taxpayer has unallocated payments, only the balance after these have been taken into account will be automatically transferred to PAYE. But the amount of balancing payment must be £2999.99 or less before the unallocated credits are considered|
|4.||If, exceptionally, a balancing payment is not automatically transferred but when brought to your attention it is appropriate to transfer the amount to PAYE, use function RECORD TRANSFER TO COP|
|5.||Where the amount automatically transferred cannot be collected through the coding in one year this will be picked up through the next SA return (entry in box 7 on the Tax Calculation Summary page TCS1, if the taxpayer self-calculates). However in exceptional circumstances it may become obvious that the underpayment is not likely to be collected in the following or subsequent years. This will happen for example where the taxpayer does not have sufficient earnings or does not pay tax and the underpayment is merely being carried forward each year. In such cases you should consider transferring the underpayment back to the SA account and issuing a letter to the taxpayer explaining that it is not possible to collect through the coding. See section ‘Transfer From PAYE To SA’, subject ‘SA Stranded Underpayments’ (SAM140030)|
|6.||From 2015-2016, Class 2 NICs will be collected as part of the SA balancing payment for self-employed customers. However, the Class 2 NICs part of the balancing payment will not be transferred to be coded out as this is not covered by legislation. In these cases, the tax element only will be automatically transferred for coding leaving the Class 2 NIC element on the statement. For guidance to manually transfer the tax element of an underpayment to NPS, see SAM141021.|
Where an amount has previously been transferred to PAYE
- Increase in balancing payment
The increase will be automatically transferred to PAYE where
* The above criteria are met, and * The total balancing payment remains below £3000
Otherwise, the system will leave the additional amount of balancing payment on the SA record for direct collection. (The amount previously transferred to PAYE remains undisturbed in the taxpayer’s code).
Note: The increase will not be automatically transferred where there has been an amount previously transferred to PAYE and the entry at box 8 (Potential Underpayment) on the Tax Calculation Summary page TCS1 of the amended return has changed from that shown on the earlier version of the return. A work item will be created on the ‘Reduction of Amount Coded Out’ work list (W037) in these circumstances.
- Decrease in balancing payment
If the capture of an amended return results in a decrease to an amount already transferred to PAYE an entry will be put on the ‘Reduction of amount coded out’ (W037) work list for manual review.
Where an amount has not been previously transferred to PAYE and the other conditions for transfer above are met, the whole amount will be transferred to PAYE if
* The original amount of the balancing payment was £3000 or more and the amended tax return reduces this to £2999.99 or less, or * There was originally no balancing payment but the amended tax return results in a balancing payment of £2999.99 or less
Otherwise, the balancing payment will be collected through the SA computer system.
PAYE Service ‘Reconciliation Summary’ screen
Underpayments transferred from SA to PAYE are shown as follows on the ‘Reconciliation Summary’ screen in the PAYE Service
- Tax year
- Status - Reconciled SA
- Date paid
- Year Coded Out
A small number of exceptions may arise and these will be dealt with entirely within PAYE, see subject ‘SA Underpayments’ (PAYE98005) in the PAYE Manual.
Transfer to COP security review (W033)
This work list is required for a percentage of cases where function TRANSFER TO COP has been used.
Reduction of amount coded out (W037)
This work list is populated where reductions to SA balancing payments arise from use of the functions AMEND RETURN, AMEND RETURN FOR ENQUIRY, CREATE RETURN CHARGE, CREATE RETURN CHARGE FOR ENQUIRY and UNLOG RETURN throughout the year.
The SA statement is updated every time an amount is transferred to PAYE and shows the amount transferred as ‘Included in PAYE Code for Year yy/yy’.
Payments on account are automatically reduced to reflect the amount transferred to PAYE.
A taxpayer who is liable to make payments on account may file his or her return before the due date for the second payment on account. The return does not indicate that the balancing payment is not to be coded. You may in turn capture the return before the payment on account is settled. The balancing payment may amount to £3000 or more only because the unpaid payment on account is added to the balancing charge at the time of capture. In this scenario, a work item will not be created.
When settling the second payment on account, the taxpayer may ask for confirmation that the balancing payment is to be collected through his or her PAYE coding. Although at the time of capture the total ‘underpayment’ amounted to £3000 or more, it now falls within the limit for collection by coding. If the balancing charge is not coded, the taxpayer will be penalised for submitting the return early.
You should manually code out the balancing charge by restricting the PAYE code, if possible, in this scenario.