PAYE11125 - Coding: codes: how they are used and calculated: indicators

It is essential that all relevant indicators are

• Set on the record as soon as the need for them arises
• Deleted from the record as soon as they become redundant

The system will automatically set some indicators.

The table shows the indicators that can be set. For details of how to set or unset an indicator see ‘Indicators’ at PAYE103065.

Indicators	Notes
Manual correspondence	The individual requires manual correspondence only
Manual correspondence to employer	The employer requires manual correspondence. This indicator is set or unset by editing the individual’s employment details
No Allowances	This indicator will inhibit the inclusion of Personal Allowance and Married Couple’s Allowance in coding and end of year reconciliation. Generally this will be in non resident cases, see PAYE81750, or where an SA customer tells us that they do not want any allowances set against their PAYE income, see PAYE11105. There may be some cases migrated across from COP to the PAYE Service that will have the No Allowances indicator automatically set - where no allowances are included in the latest code at migration (from all current employments) then the No Allowances indicator will have been set.
-	Notes:
-	Where this indicator is set or applies part way through a year it may also be necessary to set the Inhibit Auto Reconciliation indicator, as no allowances will be included in the reconciliation.
-	The No Allowances indicator should not be used where you are attempting to move allowances between employments. See PAYE13115.
-	At migration the No Allowances indicator will have been set where only a secondary employment exists and the code at the secondary employment is BR, 0T or D prefix or the Scottish or Welsh equivalent.
Digital P2	If a user has set a digital preferences this box is selected, this means that the customer has elected for digital copies of their P2.
P2 to Agent. Note: P2’s are no longer being sent to agents whether this indicator is set or not	Previously when an NPS record had a live agent entered the agent received a copy of the customer’s P2. From now on no P2s will be sent to agents, instead a note will appear on the customer’s P2 advising them to show their agent the P2 if they have one.
Modified	This indicator is set to prevent Auto coding and P2 / P6 / P9 issue to individual or employer. Personal allowance will be present in the code and any benefit in kind will be limited to £1. The individual will be an EXPAT record.
Tax equalised benefits	This indicator is set to prevent Auto coding and P2 / P6 / P9 issue to individual or employer. The individual will be an EXPAT record.
S128 (now S811 ITA 2007)	This indicator may be set where the individual has been non resident for a complete tax year and therefore is entitled to claim for certain types of their UK income to be ‘disregarded’ under Section 811 ITA 2007, see PAYE13144.
Manual Code	This indicator is set where automatic coding issue is to be inhibited. For example where bereavement allowance is being received, where an in year cessation repayment has been made. Where this indicator is set any amendments to daily coding will default the P2 issue to not issue. Where a P2 is to be issued, change not issue to issue.
Penal	This indicator is set by the system where a targeted review form is outstanding. The indicator is cancelled when a date of receipt is recorded on the system for the outstanding form.

Scottish Rate of Income Tax

The Scotland Act 2012 gives the Scottish Government the powers to set Scottish income tax rates which is administered by HM Revenue & Customs (HMRC) on behalf of the Scottish Government. The Scottish Government will be able to set the rates of income tax lower or higher than the rates that apply in the United Kingdom (England, Wales and Northern Ireland). For 2016 to 2017, if they set a different rate it would have applied to all income tax rates, the basic rate, the higher rate and the additional rate will all go up or down by the same percentage, relative to the 'rest of UK'(rUK) rate. From 2017 to 2018 the Scottish Government can set the rates independently of each other. They can also increase or decrease the number of tax rate bands.

Further information on Scottish tax is given at PAYE100035.

With the introduction of the Scottish rate of income tax, NPS has a new Income Tax Residency Status screen. This has two new sections.

1. Taxpayer Status.

This section identifies the tax year the individual is classed as a Scottish taxpayer and liable to pay tax at Scottish rates. The Income Taxpayer Status is based on the individual’s Main Place of Residence for the year concerned. Where the individual was resident in Scotland for more days than anywhere else in the UK it will display ‘Scottish’, where the individual was resident in Wales for more days than anywhere else in the UK it will display ‘Welsh’ and where the individual was residents in the rest of the UK (England and Northern Ireland) for more days than Scotland or Wales the Income Tax Residency Status will be blank.

2. Regional Residency Periods

Where an individual’s Main Place of Residence is in Scotland the Start Date will hold the date when they became a Scottish resident. The earliest start date that can be held is 06/04/2016 because this is the date when the Scottish rate of income tax started.

If a customer moves from Scotland to another part of the UK (England, Wales or Northern Ireland) the End Date will hold the date they moved from Scotland.

The Reconciliation Summary screen has a Residency column and will display ‘Scottish’ to indicate where an individual has been reconciled using the Scottish rates.

From 2016 to 2017 The Total Tax Chargeable screen will show the rates that have been applied, either rUK or Scottish. It will also show the amount of Income tax that is to go to the Westminster Government and the amount that is to go to the Scottish Government. For 2016 to 2017, if the year has been reconciled at the rUK rates, the full amount will go to the Westminster Government. If the Scottish rates have been used then the liability is proportionally split between Westminster and Scotland. The amounts will be displayed in the 'Tax Liability rUK' and 'Tax Liability STp' fields.

From 2017 to2018 all the tax due from non-savings income for a Scottish taxpayer will go to the Scottish Government.
For all years, all the tax due on savings and dividends will go to the Westminster Government.

Welsh Rates of Income Tax

The Wales Act 2014 gives the Welsh Government the powers to set Welsh income tax rates which is administered by HM Revenue & Customs (HMRC) on behalf of the Welsh Government. The Welsh Government will be able to set the rates of income tax lower or higher than the rates that apply in the rest of the United Kingdom (England and Northern Ireland).

Further information on Welsh tax is given at PAYE100040.

Within NPS there is an Income Tax Residency Status screen which has two sections:

1. Taxpayer Status.

This section identifies the tax year the individual is classed as a Welsh taxpayer and liable to pay tax at Welsh rates. The Taxpayer Status is based on the individual’s Main Place of Residence for the year concerned. Where the individual was resident in Wales for more days than anywhere else in the UK it will display ‘Welsh’, where the individual was resident in Scotland for more days than anywhere else in the UK it will display ‘Scottish’ and where the individual was residents in another part of the UK (England and Northern Ireland) for more days than Scotland or Wales the Income Tax Residency Status will be blank.

2. Regional Residency Periods.

Where an individual’s Main Place of Residence is in Wales the Start Date will hold the date when they became a Welsh resident. The earliest start date that can be held for a Welsh period of residency is 06/04/2019 because this is the date when the Welsh rate of income tax started.

If a customer moves from Wales to another part of the UK (England, Scotland or Northern Ireland) the regional period End Date will hold the date they moved from Wales. 

The Reconciliation Summary screen has a Residency column and will display ‘Welsh’ to indicate where an individual has been reconciled using the Welsh rates.

The Total Tax Chargeable screen will show the rates that have been applied, either rUK, or Welsh. It will also show the amount of Income tax that is to go to the Westminster Government, and the amount that is to go to the Welsh Government. For 2019 to 2020, if the year has been reconciled at the rUK rates, the full amount will go to the Westminster Government. If the Welsh rates have been used then the liability is proportionally split between Westminster and Wales. The amounts will be displayed in the 'Tax Liability rUK' and 'Tax Liability WTp' fields.

For all years, all the tax due on savings and dividends will go to the Westminster Government.

Indicators	Notes
Welsh or Scottish (Taxpayer Status)	This indicator is set on the Income Tax Residency Status screen where the individual has been resident in Wales or Scotland for more days than anywhere else in the UK in the tax year concerned. Where it is blank this indicates the individual is not resident in Wales or Scotland and liable at the England and N.Ireland rates of income tax.
Regional Residency Period Start Date	Date the individual became a Welsh or Scottish resident.  The earliest start date that can be held for a Scottish resident is 06/04/2016 when the Scottish rate of income tax started and the earliest date that can be held for a Welsh resident is 06/04/2019 when the Welsh rate of income tax started.
Regional Residency Period End Date	Date the individual moved away from Wales or Scotland.
Welsh or Scottish (on reconciliation summary screen)	This indicates what status was used for the reconciliation
Tax Liability rUK	The amount of Income tax applicable to the UK Government
Tax Liability STp	The amount of Income tax applicable to the Scottish Government
Tax Liability WTp	The amount of Income tax applicable to the Welsh Government