PAYE77070 - PAYE operation: incapacity benefit: modified PAYE used by department for work and pensions

The main differences from normal PAYE are

• Department for Work and Pensions (DWP) only use a small number of codes, based on the most common personal allowances
• No code deductions or restrictions (except HPAR and MAW) are possible
• DWP cannot take into account pay and tax from previous employments and so cannot make refunds. Incapacity Benefit (IB) codes are therefore always on Week1 / Month 1 basis if there is previous pay and tax in the year taxable IB commences
• PAYE is applied to the IB that is due on each weekly ‘pay day', irrespective of when payment actually takes place

Where allowances are due which cannot be given in the coding, either

• An NT code is allocated

Or

• Leics and Northants (IBTO) make a refund at the end of the year

Where there are deductions or code restrictions that cannot be included, any underpayment is deemed to be stranded unless or until IB ceases.

Since DWP cannot refund tax from an earlier employment, repayments are made instead by

• Leics and Northants (IBTO) either at the end of the year, or end of claim

Or

• By the new employer if the claimant goes back to work