PAYE12080 - Coding: coding deductions and expenses: underpayment restriction

When an underpayment of tax is coded out, the system calculates an underpayment restriction based on the rate of tax the individual is liable at the primary employment. The system uses the individual’s rate of liability to calculate the restriction. In cases where the inclusion of the underpayment restriction means that the individual’s liability straddles the rate bands, an appropriate restriction will be calculated to take into account the ‘straddling’.

When an end of year tax calculation results in an underpayment and the underpayment is less than £3000, the underpayment will be automatically included in the tax code. If the underpayment cannot be coded out because of insufficient income then a work item will be generated.

Where the underpayment is from an NPS reconciliation, work item 236 is created and will advise you to issue a letter to the individual and request a voluntary payment. Further instruction about the work item is in SPD WI236.

Where the underpayment is an SA underpayment, work item 093 is created. Further instruction about the work item is at PAYE12071.

Where both work item 236 and work item 093 are created you should follow PAYE90011.