PAYE78100 - PAYE operation: taxation of job seekers allowance: what the department for work and pensions does

The Department for Work and Pensions (DWP) operates a modified form of PAYE on taxable benefits, which are paid without deduction of tax. This is controlled through their own computer system (National Unemployment Benefit System) NUBS2. It works like this

• Benefit claimant hands in his forms P45(2) and (3) to the Benefit Office

• The P45(3) details are sent direct to the PAYE Service by NUBS2
• Where the PAYE Service record cannot be updated automatically a Work List will be generated

• A tax calculation is made either

• At the end of a benefit claim

Or

• At 5 April for continuing claims

All taxable benefit paid is included in the tax calculation together with any cumulative pay details from previous employments

• Any overpayment of tax is repaid, except that awaiting ‘P48' authority on form P6U

Or

• Any underpayment is reported to the old office to be dealt with as a potential underpayment. Where a potential underpayment arises the form P45 or P14U shows the existing code on a Week 1 basis

• A statement of taxable benefit is sent to the claimant
• The DWP tells HMRC of any adjustments on form P180 subject to the limits of more than £40 for an increase or more than £7 for a decrease

When the claim to benefit ends

• The DWP sends the claimant fresh forms P45(2) and (3)
• Form P45(1)U information is sent by NUBS2 to the old office if known
• The P45(1)U details are held on microfiche at the Central Liaison Unit

Where the benefit claim continues after 5 April

• The DWP issues forms P14U and P60U at the end of the tax year

Where the P14U is not available for the end of year or P45(1)U for claims that have ceased in year

• Write to the customer asking them to send in P60U or P45(1a) - if they do not hold them they should obtain details directly from Job Centre Plus to support a claim to repayment
• In cases where the customer is likely to be underpaid do not attempt to try and reconcile early unless a request is made by the customer - PAYE Service will reconcile when all outstanding information is received