SE71405 - Assessments, appeals and other procedures

Assessments for tax years 1996/97 onwards

Assessments not needed in most cases

Nearly all Schedule E tax is collected on a provisional basis through the PAYE system using code numbers and tax tables. Tax is deducted from wages and salaries by the employer and paid over to the Collector. The code number can take into account other Schedule E income from which tax cannot be deducted directly, such as benefits in kind. Small amounts of income assessable under other Schedules of charge can also be effectively taxed through PAYE by setting allowances against them and only giving any balance in the code number.

So, for most taxpayers whose income is wholly or mainly within Schedule E, where the PAYE coding notice is accurate and deductions are made in accordance with cumulative tax tables, the total net tax deducted will be correct so that no further action is needed. (The PAYE system is designed to marginally under-deduct to prevent large numbers of taxpayers overpaying very small amounts and then making repayment claims.)

Section 205 ICTA 1988

Section 205 ICTA 1988 provides that assessments are not needed when PAYE gets things right in the tax year.

In most cases where PAYE has not got things right in the tax year, matters are sorted out informally at the year-end rather than by assessment. Under the informal procedures which have existed for many years, over-payments are repaid automatically and under-payments, up to a limit (currently £2,000 ), are automatically coded out for collection through PAYE in a later year. The taxpayer is not disadvantaged in any way by the informal procedures. The saving to the Revenue is simply in administrative costs, and the taxpayer is saved unnecessary work These informal procedures, which are set up under the general power given to the Board of Inland Revenue to manage the tax system, are covered at EP4650 onwards.

However Section 205 ICTA 1988 also gives taxpayers the right to self assess for any year.