PAYE13115 - Coding: coding: general principles: more than one coded source
If, as the primary source record, you want to change a secondary source code you must make the changes by allocating the allowances or codes using the Employments Allocation Function from the Tax Code Header screen in the coding area.
Where there is only primary and one secondary source and surplus allowances are available from the primary source, where the estimated pay for the secondary source is unknown, the coding calculation will automatically allocate all of the surplus allowances to the secondary source.
Where there is more than one secondary source, allocate all surplus allowances in the following order
|1.||Against largest secondary occupational pension and then any other occupational pension source|
|2.||Against largest secondary source PAYE employment and then any other employment|
|3.||If the final secondary source does not use up all of the remaining surplus allowances against the estimated pay, then any balance of unused allowances should be returned to the primary source|
|4.||Reallocate allowances as the customer requests|
Note: You should only allocate at the customers request, or make an unusual allocation of allowances not stated in the order above in exceptional circumstances. These circumstances should only be where you have not been able to resolve a complaint or coding objection despite advising the individual that the total amount of income tax to be deducted will remain the same, regardless of the allocation of allowances. The manual code indicator must be set in these cases and a Contact History note made explaining the allocation.
Care is needed if, as the primary source record, you have allocated a code suffix L, P or Y to the secondary source. Remember, these codes will be increased automatically to include any Budget changes.
If you want to allocate the ‘L’ suffix to a secondary employment then follow this order
- Allocate the allowances to the secondary employment
- Amend the suffix of the primary employment to suffix ‘T’
- Amend the suffix of the secondary employment to ‘L’
- Select the ‘Recalculate’ option
- Consider the basis of operation for each source and make any relevant changes
A primary employment and a secondary employment can be swapped over so that the allowances are given at the source that is beneficial to the individual. For example, an individual has a primary occupational pension and a secondary employment source. The individual requests that all their allowances are given to the secondary employment source.
Using the Employment Summary screen, access the Employment details screen for the primary occupational pension and change the Employment type ‘Primary’ to ‘Secondary’ using the drop down option. Save the change and complete Contact History with details of the change made.
Using the Employment Summary screen, access the Employment details screen for the secondary employment and change the Employment type ‘Secondary’ to ‘Primary’ using the drop down option. Save the change and complete Contact History with details of the change made.
Issue a tax code calculation (PAYE11120) and consider the basis of operation of the new tax code, the tax codes may need to be operated on a week1 / month 1 basis depending on the previous tax code operated at each source.
Note: Where a primary record for incapacity benefit is to be swapped over to be a secondary source, take the following action before swapping over
- Make a note of the employment’s estimated earnings recorded on IABD for the primary incapacity benefit source.
Note: You may need to recalculate this amount as the figure could have been carried forward from a previous year or employment source (this will be used when updating IABD for the amount of incapacity benefit to be included as a deduction in the new primary source tax code).
- Amend the primary employment incapacity benefit estimated earnings to zero
- Using the Employment Summary screen access the Employment details screen for the primary incapacity benefit and change the Employment type ‘Primary’ to ‘Secondary’ using the drop down option. Save the change and complete Contact History with details of the change made
- Using the Employment Summary screen access the Employment details screen for the secondary employment source and change the Employment type ‘Secondary’ to ‘Primary’ using the drop down option. Save the change and complete Contact History with details of the change made
- Enter the amount of employment estimated earnings for the new primary record in IABD
- Enter the amount of incapacity benefit in IABD under Taxable Social Security Benefits (noted or recalculated from the bullet above), save the change and complete Contact History with details of the change made
- Trigger a tax code calculation and ‘Submit’ the tax code details
- On the Edit Employment Allocation screen, enter enough allowances to cover the incapacity benefit (noted from the step above) and ‘Recalculate’
- Issue a tax code calculation (PAYE11120) and consider the basis of operation of the new primary source tax code
Note: The tax code may need to be operated on a week 1 / month 1 basis depending on the previous tax code operated. Further guidance can be found in SPD 55 (PDF 55KB).
- If you are coding out incapacity benefit you should issue the DWP stencil OCCPEN held on Office Clerical Assistant (OCA) where the new primary source is an occupational pension
Calculating surplus allowances after 15 December 2010
Up to and including 14 December 2010 allowances need to be calculated manually between all sources where a primary source estimated pay or pension figure is less than the allowances due.
From 15 December 2010 onwards the PAYE Service will automatically calculate the allowances at each source and allocate the appropriate tax code at the first tax code calculation of the tax year. For the majority of cases this will be annual coding. The allowances allocated will be based on the estimated pay calculated (see PAYE13090). This process will allocate the allowances due at each source for the whole tax year. The allowances will only be subsequently re-calculated automatically by the PAYE Service when new employment / occupational pension records are set up. The PAYE Service will issue a revised P2 / P6 where the tax code has changed.
The PAYE Service will calculate the surplus allowances (net coded allowances - estimated pay) for the primary employment / occupational pension and then use the following order to establish how to allocate the surplus allowances
- Largest occupational pension
- Next largest occupational pension
- Secondary employment, highest estimated pay
- Secondary employment, lesser estimated pay
- The remaining allowances will be allocated to only one of the following
- Occupational pension, no estimated pay, earliest start date
- Secondary employment, no estimated pay, earliest start date
The PAYE Service will allocate allowances to cover the estimated pay at each successive secondary source, reducing down the allowances available as they are set against each successive estimated pay.
If the final secondary source with estimated pay does not use up all of the remaining surplus allowances the balance of unused allowances will be returned to the primary employment / occupational pension.