PAYE12071 - Coding: coding deductions and expenses: work item 93 - unable to code u/p - insufficient income live SA (Action Guide)

Work item 093 will be generated when there is insufficient income to collect an SA underpayment (that is, an underpayment ‘transferred from CESA’) through coding it out.

As a consequence of timing, work item 236 (PAYE90011) may have been created in addition / replacement to work item 093 in respect of the same underpayment. Where this is so, you should work the case / underpayment as follows

Where the work item refers to an underpayment ‘transferred from CESA’, in accordance with the guidance below
Where the work item refers to an NPS underpayment, in accordance with the guidance at PAYE90011

If you have both work items open for the same underpayment, at the point at which you commence work on clearing the underpayment you should close the incorrect work item and clear the underpayment by following the appropriate guidance. For example, if both work items are open in respect of an underpayment ‘transferred from CESA’, you should close work item 236 and follow the work item 093 guidance below to clear the underpayment.

To clear the work item, follow steps 1 - 19 below. This guide is presented as follows

Initial action in all cases	Steps 1 - 6
Update the record - underpayment can be coded	Steps 7 - 10
Update the record - underpayment cannot be coded	Steps 11 - 17
Close the work item	Steps 18 - 19

For details of how to use any of the PAYE Service functions, access the system help.

Underpayment collection

Once a tax year has already started (after 6 April) an underpayment must not be introduced into the CY coding for collection, this will create a potential underpayment for CY and not all of the coded out underpayment will be collected.

Initial action in all cases

1.	Review
	Any relevant notes
	Indicators set on the record
	Note: If the deceased indicator is set on the record go to step 12.
2.	Use SA Function VIEW STATEMENT to check the outstanding underpayment is correct
	If the underpayment has been paid, no action is required to update the SA record
	If a reduced amount is to be coded out, follow the instructions at SAM125121 in the SA Manual (SAM)
3.	Review the Financial Events Summary screen in Accounting to check the outstanding underpayment is correct
	If the underpayment has already been coded out, go to step 18
4.	Check the employment summary screen to see if there is an on-going PAYE source from which the underpayment can be collected, if there are no live PAYE sources go to step 12
5.	For all ‘live’ employment / occupational pension sources
	Update the estimated pay figure in IABD for CY+1. If there is more than one live source of income you should refer to PAYE13090 onwards
6.	Review tax coding
	If the underpayment is already included in a tax code go to step 18
	If the underpayment has not been included in a tax code, calculate whether the revised estimated pay figure for the source against which the underpayment is to be coded, will support the underpayment being collected through the CY+1 tax code. If there is more than one employment record you may need to consider the allocation of allowances, see PAYE13115
	Notes:
a.	When reviewing the tax due for the year do not more than double the individual’s liability by including collection of an underpayment.
	For example, if the individual’s estimated pay for the source against which the underpayment is to be coded would result in an annual tax deduction of £200.00, using the normal coding adjustments, the largest underpayment that can be coded is £200.00. If the underpayment to be coded was over £200.00, you cannot code out the underpayment, as this would more than double the individual’s liability.
	The liability for the source against which the underpayment is to be coded should be considered in isolation; the individual’s total liability from all sources should not be used to determine whether the underpayment can be coded.
b.	Normal rules for application of K codes should also be considered, see PAYE11096 - this is not to be confused with doubling an individual’s liability
	If the underpayment can be coded, go to step 7
	If the underpayment cannot be coded, go to step 11

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Update the record - underpayment can be coded

7.	If you are satisfied that the individual’s income is sufficient to collect the underpayment in the tax code
	Access the accounting financial events screen
	Select the year the underpayment arose, select [Submit]
	Drill into the ‘Reconciliation Event’ against the underpayment and select the ‘code out outstanding amount’ action box, see PAYE98012 (this will change the status to ‘coded out’ and pick this up in annual coding CY+1)
	Update Contact History
	If there has been a delay in coding out the underpayment see step 8
	For example, work item 093 is created in the 2009-10 tax year but is being reviewed after 06/04/2010. As a result the first tax year the underpayment can be collected is the 2011-12 tax year
	If there has not been a delay in coding out the underpayment, see step 18
8.	Use Office Clerical Assistant (OCA) to prepare and issue OCA letter SA666 (Delay in coding SA underpayments) to the individual, explaining which tax year the underpayment will be collected, if there has been a delay in coding out the underpayment
9.	Make an SA note to state which tax year the underpayment is now coded / going to be coded
10.	Go to step 18

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Update the record - underpayment cannot be coded

11.	If you are satisfied that the underpayment cannot be collected through the tax code in CY+1, go to step 12
12.	Cancel the underpayment from PAYE Service in the accounting area as follows
	Select the year the underpayment arose, select [Submit]
	Drill in the ‘Reconciliation Event’ against the underpayment
	Select [Cancel Payment]
13.	Update Contact History
14.	Use the SA Function CREATE SUNDRY CHARGE to enter the underpayment as an SA charge on the individual’s SA record
	When an SA balancing payment is transferred back from the PAYE Service the relevant due date for interest is to be given as the later of
	31 January following the end of the year for which the payment is due
	6 weeks following reinstatement to SA
15.	Make an SA note of the actions taken
	Note: If there are no continuing SA criteria you should not re-open a dormant SA record if you are transferring an underpayment back to SA.
16.	Use the standard letter (OCA43) to advise the individual of the reason why the underpayment cannot be collected through their tax code
	Use the SA SEES statement facility to print a copy of the statement, see SAM131151 in the SA Manual (SAM)
	Enclose the statement and a payslip (form PS1(BZ)) with the appropriate pre-printed return address envelope
	Note: Remember, in deceased cases the letter will need to be addressed to the personal representative of the deceased individual.
17.	Go to step 18

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Close the work item

18.	Complete the work item notes
19.	Close the work item

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