DMBM618365 - Pre-enforcement: coding out: Self Assessment (SA) and Tax Credit (TC) overpayments: change of circumstance and reconciliation

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If there is a change of circumstance, for example deceased or another higher priority debt is to be included in the code, NPS(PAYE) will:

  • do a coding check taking into account the customer’s level of income and any other underpayments to be coded to ensure the total of amount is below £17,000.00, and that inclusion of the debt does not double the customer’s liability or take more than 50 per cent of the their income
  • determine which debts can still be coded as well as any that will now be rejected
  • determine if any Year 1 debts can be transferred to Year 2 for collection via the tax code
  • notify the Head of Duty (HoD) system that the debt can no longer be coded out, or any transferred amounts from Year 1 to Year 2
  • record the details in Contact History
  • issue any P2 or P6 in NPS (PAYE) if there is a charge in the current year

If the customer ceases employment, this is not treated as a change in circumstances; the debt will remain in code until reconciliation takes place. The amount of debt coded out in current year plus one (if any) will be reviewed at the annual coding run.

Changes in estimated pay: If this changes the rate bands or reduces income, the amount possible to collect through the code may be reduced. Where this means all of a current year debt cannot be collected, we will attempt to collect this in the current year plus one (where the debt is coded out across two years)

If the debt is rejected the HoD system will post a minus type 16 remission and will send the debt back to IDMS as per existing IDMS rules.

IDMS will recognise that a previous attempt has been made to code this debt out and the work item will be selected for other appropriate campaign action.

Reconciliation

Whether reconciled in NPS or Self-Assessment, a review will take place to see how much of any coded outstanding debt has been collected in the year. The amount that has been collected is notified to CESA and any remaining amount is: -

  • if the debt has been sent to NPS pre-4th March 2020, then any remaining amount will be returned to CESA for collection
  • if the debt has been sent to NPS post 4th March 2020, and the debt is a Year 1 coded debt (first year coded) the remaining debt will be pushed to Year 2 for collection
  • if the debt has been sent to NPS post 4th March 2020, and the debt is a Year 1 coded debt (first year coded) the remaining debt will be pushed to Year 2 for collection. If it cannot be included in the Y2 tax code the debt will be returned for CESA for collection  
  • if the debt has been sent to NPS post 4th March 2020, and the debt is a Year 2 coded debt (second year of coding), then any remaining amount will be returned to CESA

The end of year reconciliation will not take place until the start of Y2, therefore any debt transferred from Y1 to Y2 will be transferred "In Year". Customers may already have part of the debt being collected in Y2, in this case the extra amount for Y1 will be added to the original part of the debt in Y2.

If the end of the year assessment shows a repayment of tax the this will be sent to the customer. It will not be set against any part of any outstanding debt included in the tax code. This may mean that customers will receive a repayment of tax for a previous tax year whilst sill having an outstanding debt in their current year's tax code. 

In Year reconciliation

If an In-Year reconciliation takes place a review will take place to determine how much of any outstanding debt included in the tax code has been collected. The amount that has been collected will be notified to CESA and any remaining amount returned to CESA for collection. It will NOT be transferred to year 2