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HMRC internal manual

Self Assessment Manual

From
HM Revenue & Customs
Updated
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Transfer of liability: transfer from SA to PAYE: manual transfer of balancing payment to PAYE

Whilst balancing payments are automatically transferred to PAYE in most cases, the manual process remains in place for use in certain circumstances.

This subject is presented as follows

Early filers

Scenario

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.

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 code out the balancing charge by restricting the PAYE code, if possible, in this scenario.

Note: 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 must not be coded out as this is not covered by legislation.

Exceptional cases

Function RECORD TRANSFER TO COP remains available for use, in exceptional cases, where the balancing payment has not been automatically transferred to PAYE.

The most likely exceptional cases are

  • Return received by 31 October but not captured until after 31 December
  • Return received within time limits and case meets the criteria for transfer but the SA record was incorrect at the time of capture. Additionally, before transferring an underpayment to PAYE, SA performs a rough calculation using the income details from the highest PAYE source on the return, to check that the underpayment does not

    • More than double the liability (introduced 6 April 2012)
    • Collect more than 50 per cent of the gross pay

When brought to your attention, if you decide that the whole of the balancing payment can be collected through PAYE use function RECORD TRANSFER TO COP to

  • Record the transfer and
  • Update the taxpayer’s SA record

Notes:

1. Where function RECORD TRANSFER TO COP is used after 28 February any surcharge on the record will not be automatically adjusted by the transfer process. Where there is a surcharge you must either delete it (if reducing to nil) or discharge the inappropriate amount (where only part of the surcharge is to be cancelled). Note: Surcharge was replaced by tax geared late filing penalties for tax years 2010-11 and later tax years
   
2. Where function RECORD TRANSFER TO COP is used 30 days after the tax return filing date, any late payment penalty on the record will not be automatically adjusted by the transfer process. Alternatively, where there is a late payment penalty you must either delete it (if reducing to nil) or discharge the inappropriate amount (where only part of the late payment penalty is to be cancelled). Note: Late payment penalties replaced surcharges for the tax year 2010-11 onwards
3. If, as a result of an HMRC error, you need to code out an underpayment after 5 April following the end of the return year, you should first ensure that the criteria for collection through PAYE are met. These are
  * The balancing charge must not exceed £2999.99
  * The return must be have been filed
  * On paper, by 31 October
  * Received online and fully processed by 31 December
  Where this is the case you should follow the Action Guide at SAM141021
  Note: Where an online return has been logged as received on 31 December but has not been fully processed when the transfer to PAYE process is run overnight on 31 December, the underpayment may not be automatically transferred
4. If following the transfer of a balancing payment to PAYE the taxpayer makes a payment intended to settle the amount, see subject ‘Transfer of liability: transfer from PAYE to SA (SAM140032) and follow the Action Guide

PAYE record

Existing procedures will need to be followed to update the taxpayer’s PAYE record when an SA balancing payment is coded out in PAYE. Detailed guidance is given in the PAYE Manual at PAYE12070.

Security review

Following the use of function RECORD TRANSFER TO COP a work item may be created and entered on the ‘Transfer to COP Security Review’ work list. The SA system will select 5 per cent of the total number of cases (subject to a daily maximum of 50 cases) where the function has been used.

Work items will be notified to the office with processing responsibility and will be subject to review by the officer with the user role of Clerical Processing Manager. A work item is not deleted automatically from this work list. The work item should therefore be deleted manually using function WORK LIST CASES or function SELECTED CASE on completion of the necessary action.