SAM141001 - Transfer of liability: transfer from SA to PAYE: introduction
Source: gov.uk (2025-11-06)


An SA taxpayer who has a live employment on the National Insurance and PAYE Service (NPS) can request that a balancing payment of £2999.99 or less be coded out.

If the underpayment exceeds £2999.99 (or is £2999.99 or less and is not coded out) payment will be expected by the normal due date. Note:The customer cannot reduce the balancing charge by direct payment in order for the reduced amount to be coded out.

Balancing payments of £2999.99 or less arising from the capture and non-enquiry amendments of tax returns, within the period 6 April to 31 December each year, are automatically considered for transfer to PAYE by the computer system.

Note: The computer system will look at the information on the return or return amendment and will automatically calculate the largest amount that can be collected through the code. If the actual SA underpayment arising is more than that amount, no part of the underpayment will be coded. If, as the result of a return amendment, an underpayment that is initially too large to be coded is reduced to the extent that it could be collected through the code, then it will be transferred automatically.

The automatic process will only transfer an amount if it believes it is possible to collect the whole of the underpayment over one year. However, it is only an estimated process. Where the taxpayer appeals against non-coding, you should use SA function RECORD TRANSFER TO COP to transfer and make manual update to the NPS Accounting Financial Events Summary screen.

Note: From 2015- 2016, Class 2 NICs will be collected as part of the SA balancing payment, for self-employed customers. However, the Class 2 NICs part of the balancing payment will not be transferred to be coded out, as this is not covered by legislation.

The function RECORD TRANSFER TO COP remains available throughout the year for use in exceptional cases, such as those not picked up for automatic transfer to NPS within the period 6 April to 31 December, or tax returns received on or by 31 October but not captured until after 31 December.

New or adjusted balancing payments arising from the use of functions CREATE RETURN CHARGE, AMEND RETURN FOR ENQUIRY and CREATE RETURN CHARGE FOR ENQUIRY will not be automatically transferred.

Where the customer queries why the coded underpayment has been shown in their tax calculation, send the SEES letter SA665 which explains that where an underpayment has been collected in the code, the self assessment calculation for that year must include the same amount in order to retain that tax. If the coded amount is not included in the calculation, that amount will be repaid incorrectly.

Submission of tax returns

Paper tax returns

Taxpayers wishing to have their balancing payments coded out should submit their paper returns by 31 October following the end of the year to which the return relates. (For example, a taxpayer who wishes to have a balancing payment that arose in 2012-13 coded out should send in his / her tax return by 31 October 2013).

The reason for this is that we have given an undertaking to consider coding out qualifying balancing payments for all paper returns received by 31 October.

The system however will automatically code out a qualifying balancing payment if the return is captured before 31 December, that is prior to annual coding (the first week in January).

This means that where a paper return is received after 31 October and we are able to process it before 31 December, a qualifying balancing payment will also be automatically considered for coding out.

Notes:

1.

Where the paper return is received after 31 October and has not been processed before 31 December you must not code out the balancing payment

2.

If, as a result of an HMRC error, you need to code out an underpayment after 5 April, you should follow the guidance at SAM141020 (https://www.gov.uk/hmrc-internal-manuals/self-assessment-manual/sam141020)

Online tax returns

The automatic process has enabled the Department to extend the time limits by which a return can be submitted online and still have a balancing payment considered for collection through the tax code.

The dates by which the return must be submitted are on or before 30 December.

Note: These dates allow the underlying capture processes to post the data to the SA record before the Annual Coding run takes place.

Where the online tax return is submitted after the above dates the underpayment must not be manually coded out.

Simple Assessment

Simple Assessment was introduced in September 2017, as a method of collecting any underpaid PAYE tax following the End of Year reconciliation, where the underpayment cannot be collected via the individual’s tax code, from tax year 2016-17 onwards.

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 that have existed for many years, over-payments are repaid automatically and under-payments, up to a limit are automatically coded out for collection through PAYE in a later year. The amounts HMRC can collect through the code is dependent on the total income. If the amount to be recovered is above the total amount allowable then the underpayment will be collected through Simple Assessment (https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye96301).