Auto-coding is the function which allows taxpayer information to flow across from the self assessment (SA) computer system to the PAYE system. The information is then used to update PAYE codes automatically.
HMRC has advised us that the guidance which we published in 2011 about SA auto-coding is not quite correct. In our 2011 news item, we referred to income and reliefs being included/excluded from the PAYE code, but HMRC guidance refers to income only.
In some cases the tax due on non-PAYE income for SA cases can be collected automatically through the tax code via SA auto-coding. Ticking box 3 on page 5 of the return will stop that happening. However there is no equivalent of a box 3 that can be used to stop reliefs being included in the code. As a result taxpayers could find themselves with a code containing a relief which may not be due and this could result in a tax underpayment at the year end.
We wonder whether this is helpful? Do your clients want their reliefs as well as their income to be either included in or excluded from their codes?
ICAEW is thinking about whether we need to make representations to HMRC. Tell us what you think below and if you have any real life (anonymous) examples to share, we would be interested to hear about them. Please contact email@example.com