PAYE90025 - Reconcile individual: underpayments: PAYE underpayments
Only underpayments of up to £2999.99 can be recovered through the tax code.
Potential underpayments are not included in the £2999.99 limit (whether in-year or when the year the PUP arises is formally reviewed) and it is possible that £3000 or more can be included in a code where a potential underpayment arises. For example, where an informal calculation has been issued for CY-1 and the CY code has been reduced to include benefits in kind and a CY potential underpayment has been calculated. The CY+1 code will include the total underpayment from CY-1 and CY. See example below
| Informal calculation underpayment CY-1 | £2850.00 |
| Potential underpayment CY | £350.00 |
| Total underpayment coded CY+1 | £3200.00 |
Where an actual underpayment of £3000 or more arises, the PAYE Regulations state that the underpayment must not be collected through the tax code. The underpayment should be collected through SA unless a voluntary direct payment is made. This applies whether the underpayment covers one or more years. An SA return will need to be issued for each year for which a P800 has been issued.
Before triggering a reconciliation you must ensure that, where there is a current live employment, there is also a figure of estimated pay on the record.
