PAYE81071 - PAYE operation: double taxation claims submitted by non resident individuals: cancellation of double taxation relief: coding (Action Guide)
To issue a tax code when the double taxation (DT) relief has been cancelled, follow steps 1 - 10 below.
The guide is presented as follows
Cancellation of DT relief - coding CY
Steps 1 - 6
Cancellation of DT relief - coding CY+1
Steps 7 - 9
Inhibit Automatic Reconciliation and set No Repayment indicator
Step 10
Cancellation of DT relief - coding CY
Before you issue a tax code for the year in which a double taxation exemption has been cancelled, you will need to calculate the amount of income that will be liable to UK tax for all income sources that were previously exempt. This amount will be entered as the employment estimated earnings amount in IABD.
1. In Excel select SEES then Other Calculators + Forms + NPPS then Dates Calculator
- Select time apportionment tab
‘Base Period’
- ‘From’ date is start date of current tax year
- ‘To’ date is the following 5 April
- ‘Amount’ is total estimated amount of income for the year
‘Apportionment Period’
- ‘From’ date is date of cancellation of exemption
- ‘To’ date is following 5 April
This calculates the amount of income liable to UK tax
- Print a copy of the calculation
- Repeat for each source of income that was previously exempt
Where no state pension is received, or the state pension was not exempt, go to step 3
2. For state pension, only the liable amount of state pension is entered in the State Pension Box in IABD
- Calculate the amount of liable state pension as in step 1 above
3. Update employment estimated earnings to show the liable estimated amount
- In IABD Landing, select other form and relevant tax year. Enter date of receipt
- Drill down into Employment Estimated Earnings
- Enter the liable amount, as calculated in step 1, for all income that was previously covered by the exemption
- Enter the gross estimated amount for any income that was not covered by the exemption
- Save
Where no state pension present or where state pension was not covered by the exemption, go to step 5
4.
- Drill down into Pensions and then into State Pensions
- Record the liable amount as calculated in step 2
- Set the Estimated National Insurance Benefit indicator
- Set the frequency to Annual
- Save and Save again
- Select save
5.
- Select Individual
- Select Indicators
- Delete freehand note in Additional Notes
- Save
- Enter Contact History note - in the Actions box enter ‘DT exemption cancelled with effect from [date]. IABD updated for year of cancellation’
- Save
6. You will now be taken to the Coding Screen
- You will need to request the P60 for the current tax year as an underpayment of tax may arise
- Select Notes
- Select Special Notes
- Select ‘P60’ and the current tax year and Save
- Ensure that the P2 and P6 are showing as Issue, and save / submit
- Continue with the coding following normal rules and allocate any unused allowances to secondary sources as applicable
- Ensure all codes are issued on a week 1 / month 1 basis
- Complete Contact History note - in the Actions box enter ‘[tax year] coding following cancellation of DT exemption’
Cancellation of DT relief - coding CY+1
7. In IABD landing select Other Form, select CY+1 tax year, enter date
- Drill down into Employment Estimated Earnings
- Enter full estimated pay for each income source
- Save
Where no state pension is received, or state pension was not exempt, go to step 9
8.
- Drill down into Pensions, then into State Pensions
- Enter full amount of state pension for CY+1
- Set Estimated National Insurance Benefit indicator
- Set frequency of payment to Annual
- Save and then Save again and submit
9. Enter Contact History note - in the Actions box enter ‘IABD update CY+1 following cancellation of DT exemption’
Inhibit Automatic Reconciliation and set No Repayment indicator
You will need to inhibit automatic reconciliation and set the No Repayment indicator for the year the double taxation relief was withdrawn. This is because when reconciling the year you will need to enter the non-liable amount of income as Foreign Pension Allowance in IABD - see PAYE81072 for how to reconcile the year of cancellation of double taxation relief.
10. In Reconciliation
- Select tax year for year of cancellation of exemption
- Select allow / inhibit auto reconciliation
In Indicators
- Set No Repayment indicator
- In Additional Notes box, enter ‘No Repayment indicator set as Double Taxation relief cancelled wef [date of cancellation of exemption]’