PAYE codes, CIS returns, ATED returns

RTI was supposed to produce more accurate PAYE codes, but the evidence so far is quite the opposite, as we explain below. We have an update on compulsory online filing for CIS returns and the subcontractor verification process. Finally, a warning about ATED returns, which are now overdue for 2016/17. 

This is an extract from our topical tax tips newsletter dated 12 May 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

PAYE codes 
It's been a bumper year for PAYE coding errors. Here is summary of all the known issues, and what to do resolve them. 

Allowances 
In spite of an application to transfer 10% of the allowance to a spouse, PAYE codes have not been altered for the couple. 
  
The personal allowance should be restricted where the taxpayer's income exceeds £100,000. However, the RTI system estimated 2016/17 income from February 2016 year to date figures which excluded any year-end bonuses. Thus the taxpayer's total income for 2016/17 is underestimated and allowances are not restricted. 
  
Dividend income 
This will be estimated based on the 2014/15 tax return. Taxpayers can ask for dividend income to be excluded from their code, in which case they will need to pay any dividend tax due by 31 January 2018. 
  
Interest received 
Interest is also estimated from the 2014/15 tax return. The personal savings allowance of £1000 or £500 may have been ignored.   
  
Ceased job 
The date of leaving can't be reported under RTI until the FPS for the last employment period is submitted. The taxpayer may be recorded as starting new job before the notice of his leaving date filters through to the RTI computer. 
  
Benefits in kind 
All benefits included in payroll and taxed as income should be removed from the code, but this is not happening. Some taxpayers are seeing random benefits appearing in their code which they have never received. 
  
Pension withdrawals 
Where the taxpayer has taken a one-off cash withdrawal from their pension fund, this may be incorrectly treated as a regular recurring withdrawal. 
  
Scottish taxpayers 
Taxpayers who don't use the word “Scotland” in their residential address logged with HMRC may not be registered as Scottish taxpayers, and thus don't receive a S prefix to the code, as they should do. 
  
All of the above issues can be reported to HMRC using the PAYE code notice correction form (see below). But the Scottish address issue may need to be corrected using the change in personal details form. For the 'old' address use that on the P2 notice of coding form.

This is an extract from our topical tax tips newsletter dated 12 May 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>> 
 
The full newsletter contained links to related source material for this story and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>