Dynamic coding-out of Self Assessment: initial equality impact assessment
Published 26 November 2020
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Project objectives
The Chancellor announced at Autumn Budget 2017 HMRC’s intention to introduce improvements to an existing low cost debt recovery tool, Coding-Out of Debt. HMRC uses this tool for some self-assessment customers who have failed to pay their tax or engage with HMRC where the customer has a Pay As You Earn (PAYE) income source. Importantly this is not a payment option for the customer.
The new ‘Dynamic coding-out of Debt for Self Assessment customers’ will modernise the functionality to enable HMRC to Code-Out more debts, more quickly and commence recovery of debts during the tax year in which HMRC identifies this is the most appropriate recovery option, rather than in the subsequent tax year, as is presently the case.
HMRC’s Debt Management (DM) Team uses the most appropriate, cost effective tool, at the right time to recover debts which are overdue to the exchequer. Debts are recovered by changing a customer’s PAYE income tax code to deduct payments from PAYE income tax earnings.
Where HMRC is no longer able to recover debt via the customer’s tax code or this is no longer the most cost effective option, an alternative recovery option will be chosen.
The coding-out system already has existing robust inbuilt rules designed to protect the customer from hardship.
These provide a threshold before deductions can be made and limit the amount that can be deducted from a customer’s earnings.
However, as financial hardship is dependent on an individual’s overall personal financial situation, customers can contact HMRC to discuss their income and expenditure and, if appropriate, an alternative payment arrangement can be agreed.
Customer groups affected
The customer groups that will be impacted by the change are:
- taxpayers previously or currently in Self Assessment (SA) with PAYE income source
- agents
- employers
What customers will need to do
There is nothing additional that the customer needs to do as a result of this change. This change will improve and speed up an existing process for recovering debt. It is a recovery tool for HMRC to recover debt from customers who have failed to pay their tax or engage with HMRC.
Assessing the impact
We assessed the equality impacts on all the protected characteristic groups in line with the Equality Act and Public Sector Equality Duty and section 75 of the Northern Ireland Act.
Racial groups
Impact on customers
We do not anticipate that there will be impacts on customers in this protected characteristic group.
Disabled and not disabled
Impact on customers
No impact anticipated, as above.
Gender
Impact on customers
No impact anticipated, as above.
Gender reassignment
Impact on customers
No impact anticipated, as above.
Sexual orientation
Impact on customers
No impact anticipated, as above.
Age
Impact on customers
No impact anticipated, as above.
Religion or belief
Impact on customers
No impact anticipated, as above.
Pregnancy and maternity
Impact on customers
No impact anticipated, as above.
Marriage and civil partnership
Impact on customers
No impact anticipated, as above.
People with dependents and those without
Impact on customers
No impact anticipated, as above.
Political opinion (for Northern Ireland only)
Impact on customers
No impact anticipated, as above.
People who use different languages (including Welsh Language and British Sign Language)
Impact on customers
Yes. Coding out of SA debt customers consist of a range of diverse people whose first language may not be English, including Welsh-speaking customers.
Currently coding-out related forms, such as the P2 and P800, can be provided in Welsh and any letters, online services or contact with the customer can be provided in Welsh in line with HMRC’s legal commitment under the 1993 Welsh Language Act.
In April 2019 it was concluded that coding-out would impact only a very small proportion of Welsh language customers. Current data shows that 0.01% of the SA population who have a debt with HMRC have a Welsh Language signal set. Only a proportion of these are likely to also have a PAYE income source through which HMRC can attempt to code out the debt.
Further rules governing the coding–out process, such as earnings levels, would reduce these volumes even further.
As mentioned, any letters or contact with the customer will be provided in Welsh where requested, in line with HMRC’s legal commitment under the 1993 Welsh Language Act.
HMRC is currently working with groups such as the Royal Association for the Deaf (RAD) to co-develop support material for deaf people who do not use English, and therefore British sign language, as a first language.
For any customers whose first language is not English, alternative arrangements can be made for friends and family to interpret or speak on a customer’s behalf.
Opportunities to promote equalities
We have considered opportunities to promote equalities and good relations between people in each of the protected characteristic groups and those outside of that group. None have been identified within the scope of this project.