PAYE93045 - Reconcile individual: end of year reconciliation: tax calculation - reasons for underpayment screen

Note: You will need to be familiar with the contents of PAYE93036 (Tax Calculation Issues) before you proceed to authorise the issue of a tax calculation and, where you are called upon to review a tax calculation that has already been issued.

When a tax calculation is triggered and it results in an underpayment above tolerances the system automatically selects the reason(s) as to why a customer is underpaid and the details concerned are displayed in one or both of the following underpayment reason screens

• Reason for Underpayment screen 1. The screen displays underpayment reasons under the heading of ‘The Following Included In The PAYE Code Was Lower Than The Amount Taxable’
• Reason for Underpayment screen 2. The screen displays underpayment reasons under the headings of ‘Amount in Code Higher Than Amount Due’ and ‘Other’

There are two different reasons as to why you may need to access the screens

• 1. To review/amend the reasons chosen by the system as part of the process required to approve a tax calculation for issue

• 2. To review the reasons that have already been accepted as being correct in respect of a tax calculation that has already been issued or is pending issue

The way in which you access the underpayment reason screens differs in respect of each of them.

Reviewing underpayment reasons: approving tax calculations for issue
Reviewing underpayment reasons: tax calculations already issued or pending issue

Reviewing underpayment reasons: approving tax calculations for issue

As part of the manual process to approve the issue of a tax calculation, once you are content with the calculation itself, you will automatically be taken to underpayment reason screens when you select the [Submit] button on the Tax Calculation screen (PAYE93037). The screens display (by having an indicator present in the checkbox next to the appropriate reason) the reason(s) the system has chosen as to why the customer is underpaid. You will need to review the reason to ensure that they agree with those that you found prior to determining that the calculation itself was correct. When you do this and you

• Agree with the reasons chosen by the system you do not need to take any further action with regard to them and you should proceed (by selecting the [Submit] button on screen 2. towards authorising the tax calculation to be issued
• Do not agree with reasons chosen by the system you should amend them by selecting any new ones and deselecting any you consider to be invalid before you proceed towards authorising the tax calculation to be issued

Where you approve a tax calculation for issue there must be at least one reason and no more than 5 reasons in the underpayment reasons screens to describe why the customer is underpaid. If there is not at least one reason or there are more than 5 and you authorise the tax calculation to be issued, you will receive an appropriate message telling you to correct matters before proceeding to approve the calculation (see hyphenated entries 5 and 6 below where there are more than 5 reasons).

Where

• A reason for the underpayment is ‘Non Cash Benefits’, instead of selecting an appropriate checkbox on the reason screens, you should select the ‘Other’ option on screen 2. and enter a free text note of ‘None Cash benefits were less than the amount coded’ in the Reason field
• A reason found as to why the customer is underpaid is that their employer failed to deduct the correct amount of tax, you should consider PAYE95011 before you proceed to authorise the issue of the tax calculation concerned
• The standard underpayment reasons do not apply you should select the ‘Other’ option on screen 2 and enter a free text note (of up to 50 characters including spaces) in the Reason field as to why the underpayment occurred
• The underpayment is £3000 or more, select the ‘Other’ option on screen 2 and enter a free text note of ‘Advice on how to pay the amount due will follow’ in the Reason field
• The system has identified more than 5 underpayment reasons, and 5 of them will provide the customer with a meaningful explanation of the underpayment

• • Deselect the least relevant underpayment reasons to leave the 5 most relevant present
  • Approve the tax calculation for issue

• The system has identified more than 5 underpayment reasons, and 5 of them will not provide the customer with a meaningful explanation of the underpayment

• • Make a note of the reasons selected by the system
  • Deselect all of the reasons
  • Select the ‘Other’ option on screen 2. and enter a free text note of ‘ A letter explaining the underpayment will follow’ in the Reason field
  • Approve the tax calculation for issue
  • Prepare and issue a letter to the customer explaining the underpayment reasons

Any non-standard reasons you enter into the ‘Other’ Reason field as to why a customer is underpaid, must be valid as they will be printed on the Tax Calculation (P800) issued to them.

Once you select the [Submit] button on Reason for Underpayment screen 2. the status of the calculation will be set to ’Pending’ (issue) and you will receive a message to confirm that the Tax Calculation (P800) has been issued. However, prior to being issued the underpayment will undergo an overnight check to determine how it will be collected (through coding or by voluntary payment) and the tax calculation will not actually be issued until the day following the check concerned.

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Reviewing underpayment reasons: tax calculations already issued or pending issue

To view the underpayment reasons printed on a Tax Calculation (P800) that has already been issued or, where the calculation concerned has a status of ’Pending’ (issue), you access the underpayment reason screen by selecting the [P800 Reasons] button on the Tax Calculation screen of the appropriate calculation.

In a case where your review indicates that the underpayment reasons recorded on the system are incorrect, where the tax calculation

• Has already been issued, you cannot alter the reasons already printed / to be printed on the Tax Calculation (P800) issued to the customer
• Was done as a single year reconciliation only and it is pending issue, you should proceed as follows to ensure that the reasons that will appear on the Tax Calculation (P800) subsequently issued to the customer are correct

• • Access the appropriate Tax Calculation screen and cancel the calculation using the ‘Cancel Tax Calculation’ action link
  • Re trigger reconciliation for the year
  • View the revised tax calculation and update the overpayment reasons linked to it as required
  • Approve the calculation for issue

Where you are reviewing a tax calculation that has already been issued and a reason found as to why the customer is underpaid is that their employer failed to deduct the correct amount of tax, you should consider PAYE95011 before you proceed further.

Note: Where a customer has both overpayment and underpayment reasons in a year and the year end result is that they are underpaid, the system will identify / display the underpayment reasons only. As a consequence of this, in a case where the calculation being reviewed forms part of a multiple year reconciliation and the customer

• Is overpaid in the year in isolation but the year end result is that they are underpaid (due to a large underpayment being brought forward into the year), the system will identify an underpayment reason for the year of ‘This calculation includes an underpayment for an earlier year’
• Is underpaid in the year in isolation but the year end result is that they are overpaid (due to a large overpayment being brought forward into the year), the system will identify an overpayment reason for the year of ‘This calculation includes an overpayment for an earlier year’

The reason(s) will be printed on the Tax Calculation (P800) issued to the customer and you may receive contact from them in which they ask for a full explanation of the calculation. Where this is so, you will need to fully review all aspects of the case / year (for example Coding and Employment History and the benefits coded in the year against those in the tax calculation), to explain the calculation.