PAYE coding re dividend income

PAYE coding re dividend income

Didn't find your answer?

We have recently had a spate of coding notices issued to company directors which include a restiction of £10,000 to collect higher rate tax on dividends. When challenged some tax offices will remove this without problem but others, including our local office, insist that they have the "right" to collect up to £4000 p.a. of HR tax this way.
As dividend income can fluctuate considerably depending on company results, most taxpayers do not want to pay HR tax this way through the PAYE scheme, especially as they will generally also be making payments on account under the SA system.
Can anyone point me to the relevant section of the Inspector's manuals dealing with this so that I can advise my local tax office of the error of their ways!
Thanks.
David Earley

Replies (5)

Please login or register to join the discussion.

avatar
By User deleted
14th Sep 2006 13:31

Try this link
http://www.hmrc.gov.uk/manuals/pommanual/pomcod/pomcod03119.htm

In respect of objecting to the coding out of dividends, the manual states:

"An individual may object at any time to the inclusion of non-PAYE income in a code and you must then amend the code to exclude such income. This right to object applies even if the individual has previously agreed to the inclusion of the income but then has a change of mind. Once an objection has been received an ENOTE should be made in COP Function NO and no attempt should be made to code out the income in future years."

Thanks (0)
avatar
By MacSmat
18th Sep 2006 14:09

Re Coding Notices
I attended a Working Together meeting with HMRC on behalf of the CIOT local branch. The issue of Coding notice adjustments for investment income was discussed at some length. The Revenue Inspectors present explained that they like the coded investment income on their personal PAYE codes as it means that they don't have to pay any higher rate tax on 31st January & 31str July each year. However, as tax practitioners we explained that the majority of our clients did not like their investment income coded in this way. The HMRC Inspectors present observed that the coding could be amended by a simple phone call either from the tax payer or their agent.

Additionally also note that the Revenue have discretion to include additional tax relief to enhance the PAYE code. I have personally seen EIS & VCT investments coded in and therefore the PAYE deducted from the client's salary has reduced proportionately.

Thanks (0)
avatar
By AnonymousUser
14th Sep 2006 16:52

There was a change in the rules...
... brought about by statutory instrument in 2003, that removes from HMRC any discretion but to restrict the PAYE code (if it appears appropriate) subject to the taxpayer's objection.

http://www.opsi.gov.uk/si/si2003/20032682.htm#14

Thanks (0)
avatar
By AnonymousUser
14th Sep 2006 14:25

Thanks Paula & Kenneth
Thanks for those very helpful comments. Iwill now tell my local tax office what to do with their coding adjustments (very politely, of course!)

Once again, the community has come up trumps!

David

Thanks (0)
avatar
By Paula Sparrow
14th Sep 2006 13:31

They have no right to do this
There was a bulletin, probably a couple of years ago now, which referred to more income being included in the PAYE codes, but admitting the taxpayer did not have to accept the adjustment. I will see if I can find the article and you can refer them back to it.

Thanks (0)