PAYE13095 - coding: coding: general principles: penal signal

Where a targeted review form (R40, 575(T) or P810) has been issued but not logged as received, the PENAL signal is automatically set on the record. Using COP Function RR or RI to log the form will result in automatic cancellation of the PENAL signal.

The presence of the PENAL signal does not prevent the granting of any allowance in COP Function CD and there is no justification for withholding an allowance properly claimed and found to be due because a review form, or the information asked on it, is outstanding.

Example

A P810 is issued in April 2004 as there are expenses (EXP)of £800 in the coding. The taxpayer does not respond to this (so the PENAL signal is set on the record) but in August 2002 he

• Puts in a claim for professional subscriptions (PSUB), agreed at £350 a year

And

• Is now receiving commission estimated at £200 a year

You amend the CY and CY+1 coding for these items but decide not to delete the PENAL signal as the EXP details are still outstanding.

If you do nothing further, then at the next Annual Coding Main Review, the computer will

• Withdraw EXP and PSUB for CY+1
• Increase COMM to £300
• Issue a P3P(T) with the form P2

If this is not what you want, delete the PENAL signal. Remember though that no allowances will be withdrawn or deductions increased automatically to take account of the fact that the review form is outstanding. You will need to make those adjustments yourself in COP Function CD.

Whether or nor you delete the PENAL signal, a further P810 will be issued in April 2005 as long as nothing has been logged in and there are still valid selection criteria present.

What will happen at annual coding?

The PENAL signal will have been automatically set where a targeted review form (R40, 575(T) or P810) has been issued but not logged as received. Annual Coding Main Review will then withdraw certain allowances and increase certain deductions by a set percentage, whether or not the item was the reason for the issue of the review form

• Allowances to be withdrawn. Any of the following allowances present in the coding record for CY+1 will be withdrawn
• • Gift Aid payments (CHR)
  • Expenses (EXP)
  • Loan Interest (LOAN)
  • Higher rate tax relief on pension payments (PPR)
  • Professional Subscriptions (PSUB)
  • Retirement Annuity Relief (RAR)

• Deductions to be increased. Any of the following deductions present in the coding record for CY+1 will be increased by the percentages shown
• • Commission (COMM) 50
  • Other earned income (non-Schedule E) (DEI) 50
  • Other unearned income (DUI) 50
  • Furnished lettings (FL) 50
  • Income from property (IFP) 50
  • Untaxed interest (INT) 50
  • Other emoluments (Schedule E) (OE) 50
  • Part time earnings (PTE) 50
  • Tips (TIPS) 50
  • Occupational pension (OCCP) 10
  • Personal pension annuity (PPA) 10

Annual Business Guidance Notes (BGN) will tell you if these percentages change.