PAYE13063 - Coding: coding: general principles: bankruptcy: details of a bankruptcy order are received (Action Guide)
When you receive details of a bankruptcy order in England, Wales or Northern Ireland, follow steps 1 - 21 below. This guide is presented as follows
| Initial action in all cases | Steps 1 - 5 |
| Update the record | Steps 6 - 9 |
| Action to take when debtor continues in the same job / pension | Steps 10 - 18 |
| Action to take when debtor starts work for a new employer | Steps 19 - 20 |
| SA record required | Step 21 |
Initial action in all cases
| 1. | Trace the PAYE Service / SA record, see PAYE120015 for guidance on trace and match |
| 2. | View Contact History / SA notes |
| Note: If the bankruptcy is being worked in another office, you should only request the bankruptcy papers from that office where full information is not available on the record. Make a clear Contact History / SA note of your actions; see PAYE105020 for guidance on Contact History notes. | |
| 3. | PAYE Service / SA - Review the name and address, update if necessary |
| 4. | PAYE Service - Review for deceased indicator and address any correspondance with trustee accordingly |
| 5. | PAYE Service - Remove the HR Indicator if necessary |
Update the record
| 6. | PAYE Service - Set the ‘Inhibit automatic reconciliation’ indicator for the year of bankruptcy |
| 7. | PAYE Service / SA - Set the ‘No repayment’ indicator |
| 8. | PAYE Service - Review and remove ‘No allowances’ indicator where necessary |
| 9. | PAYE Service - Review and reconcile pre bankruptcy years noting details of any underpayments PAYE93036 refers |
| Note: Do not code any underpayments for pre bankruptcy years. |
Action to take when debtor continues in the same job / pension
| 10. | Amend the CY tax code to NT week 1 / month 1 and issue a P6 to the employer |
| Note: Where employment is JSA / ESA / IB do not issue code NT, issue the existing code on a week 1 basis and make a Contact History note ‘EOY review required to complete bankruptcy process’. | |
| 11. | Consider CY+1 tax coding, if this is before Annual Coding you cannot change the CY+1 tax code. Work item 182 (PAYE13013) will be generated at annual coding to allow the CY+1 tax code to be reviewed |
| If you are working the case after annual coding has taken place, trigger a CY+1 tax code and issue the tax code with the relevant allowances due | |
| 12. | Make a note of the bankruptcy order in the Individual indicators free text box (see PAYE103065) and Contact History. Use the general bankruptcy note on Office Clerical Assistant on SEES |
| 13. | Advise the trustees that you have told the employer / pension provider to stop deducting tax |
| 14. | Ask the employer / pension provider to tell you |
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| 15. | Check to see if TNIDIS or other authority to repay / contact trustee is held, if not request this |
| Note: Make a note in Contact History of when you write to the employer / pension provider for the relevant details and or trustee for relevant details / TNIDIS. Repayments up to the date of bankruptcy must be set off against any pre-bankruptcy debts owed to HM Revenue and Customs by the bankrupt individual. Any balance remaining following such set off must be repaid to the Official Receiver or trustee in charge of the bankruptcy. Further guidance on repayments and set offs is given in the Insolvency Manual (INS) at INS9307. | |
| 16. | Use the employer's / pension provider's figure for the period up to the date of the order to work out the amount for which HMRC will lodge proof only where the Insolvency Claims Handling Unit requests this |
| 17. | PAYE only any repayment due to late operation of code NT should be issued using a manual payable order in accordance with INS9307. The Payable Order Control Officer should enter the manual payable order details onto NPS record |
| 18. | Live SA any repayment due to late operation of code NT should be issued from the SA record as a freestanding credit in accordance with INS9307. This must bedone before entering any pre bankruptcy debts onto the SA record |
Action to take when debtor starts work for a new employer
| 19. | If the debtor starts work with a new employer after the old employer has received code NT, this will be shown on the form P45 |
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| Make a Contact History note ‘EOY review required to complete bankruptcy process’ | |
Coding year that follows year of bankruptcy order |
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| 20. | Code the employee or occupational pensioner in the usual way |
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Note: NPS is unable to deal with the year of bankruptcy for PAYE cases where the year is split between the pre and post bankruptcy period and there is tax liability from the date of bankruptcy not attributed to operation of Code NT.
Where a record has already been set up in SA to deal with the bankruptcy year or SA criteria is fulfilled, the case will remain in SA.
When notification of bankruptcy is received the only cases which should be set up in SA for the year of bankruptcy are where
- There is SA criteria
And / or
- There is additional tax liability not attributed to the operation of code NT for the post bankruptcy period to the end of the tax year of bankruptcy
The year of bankruptcy for these cases should be dealt with on NPS by setting the year to ‘Reconciled - SA’.
For cases which need to be set up in SA follow guidance below.
SA record required
| 21. | Take action as directed by SAM106033 steps 14 - 19 to set up an SA record for the year of bankruptcy |
| Note: Remember to set the insolvency signal and update the SA record with the BY information in accordance with SAM106033. |
