PAYE80026 - PAYE operation: review of claims and deductions: income from property (Action Guide)

Where the rent received is over £2,500 but below £10,000 and the expenses claimed are more than 50 per cent of the rents received follow steps 1 - 8 below, as appropriate. This guide is presented as follows

Initial action Steps 1 - 3
No reply cases Step 4
Reply received Steps 5 - 8

Initial action

1. Write to the customer and request a schedule of income and expenditure. Explain to the customer that the information is required to support the P810 entry and if we receive no reply the claim will not be allowed
2. BF the case (PAYE105501) for 8 weeks
3. Do not amend the code

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No reply cases

4. If no reply is received by the BF date
 
  • Review CY-1 and issue a tax calculation where appropriate, including income but not expenses. The tax calculation should include a customer service message ‘Schedule of income and expenditure - No reply’
 
  • Review the code for CY and CY+1, including any income from property but disallowing any expense deduction, and include a note ‘Schedule of income and expenditure not returned’, to record in Contact History that the expense has not been allowed

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Reply received

5. If a reply is received by the BF date and you are satisfied with the expenditure
 
  • Review liability
 
    • If a tax calculation is required, you should include a customer service note ‘Expenses claim agreed as’ with the tax calculation that is issued to the customer, to thank them for their co-operation, and to advise them that the figures have been agreed and included in the calculation in accordance with the figures given
 
    • If a tax calculation is not required, write to the customer and thank them for their co-operation and advise them that no change is required to their figures
 
  • Amend the CY / CY+1 codes
 
  • Include note ‘Expenses claim agreed as’ to record in Contact History agreement of the expense, and the amount of the expense
6. If a reply is received by the BF date and you disagree with the expenditure
 
  • Delete or amend the incorrect item of expenditure in the calculation
 
  • Write to the customer and advise them
 
    • Of the revised taxable amount (include an explanation to show how you arrived at the amount) and your intention to issue an informal calculation for CY-1 and to amend the CY coding
 
And that
 
    • These will be issued in 30 days unless you hear from them further. You should also advise the customer that if they disagree, it will be necessary to issue a tax return. HMRC may then consider opening an enquiry into the completed return to challenge the figures disagreed with. If we do that they will be able to appeal against our conclusions and any additional tax that became due
 
 
  • Include note ‘Schedule of income and expenditure claim not allowed / revised amount’, to record in Contact History details of the revised amount
7. If the customer does not respond by the BF date assume agreement and
 
  • Issue an informal calculation for CY-1
 
  • Amend the CY / CY+1 codes
 
  • Calculate the tax adjustment in favour of HMRC or the customer and record this for inclusion on the monthly LOMR report ‘Claims / Non SA Enquiries’
8. If the customer disagrees
 
  • Write to customer to explain that a Self Assessment return will be issued as this gives the customer the avenue to appeal
 
  • Set up the case in ITSA (or reactivate any dormant ITSA record) and issue a return for CY-1
 
  • Make a note in Contact History ‘Non return - IFP query’ and note action taken
 
  • Do not amend the code

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