Personal Allowance Legislation

Personal Allowance Legislation

Didn't find your answer?

Can anyone point me to the actual legislation under which peronal allowances are set against income when there is actually more than one source?

Many thanks

Replies (19)

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Stepurhan
By stepurhan
30th Apr 2014 11:24

What are you asking?

Your question implies you are asking about splitting the personal allowance between several sources of PAYE income. If that is the case then you just phone up and ask them to amend the split between sources however you want. They will ask questions about sources of income to ensure there is no restriction to the personal allowance.

The detail on the main page indicates you are seeking to code out an underpayment, that is a different matter entirely.

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RLI
By lionofludesch
30th Apr 2014 11:45

Ask

I've always been able to have the personal allowance set against whichever source the taxpayer wanted - just by asking.

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By Marion Hayes
30th Apr 2014 12:06

Order of sources

Where there are mixed sources the decreed order of use you are entitled to ask for is PAYE first then self employment.

The HMRC system will always assume that a pension is a permanent and main source for PAYE so will move control to that source and allowances. They then try to make a variety of adjustments to a code to get it right. One I looked at today was K1120 where an adjustment had been made for basic rate band which could be used at a secondary source - I have yet to get their response to a simple D0 code at the other source.

Having said that you are entitled to ask for the allowances and/or codes to be the way you request.

A word of warning I received on my own codes a couple of weeks ago was that at a series of events e.g. processing a return, processing a P60 etc the COMPUTER may well issue different codes again on it's own so if I received any just to ring and they will put it back to my requirements.

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Replying to Marina91:
Stepurhan
By stepurhan
30th Apr 2014 12:13

Allocation is PAYE only

Marion Hayes wrote:
Where there are mixed sources the decreed order of use you are entitled to ask for is PAYE first then self employment.
You can't issue a coding notice on self-employment. Coding solely relates to PAYE, which is solely a system to try to get the right amount of tax paid up-front anyway.

The actual amount of income tax for all sources of income will be based on total taxable income, less personal allowance. Order will only make a difference if any income falls in higher rate.

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RLI
By lionofludesch
30th Apr 2014 12:21

Self employment

You can ask for your allowance to be set first against your self employment.  You don't get a coding notice for it but it can be done.

Some clients prefer to avoid building up a tax debt.

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By Marion Hayes
30th Apr 2014 12:25

@stepurhan

OP just asked about order of allowances where more than one source, not coding specifically.

I just read that as being PAYE and Self-employed or more than one PAYE source.

I have had clients where they wanted allowances in SA rather than coding despite the cash flow issues in order to fit their particular needs.

 

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Replying to richard2019:
RLI
By lionofludesch
30th Apr 2014 13:03

Agree

Marion Hayes wrote:

OP just asked about order of allowances where more than one source, not coding specifically.

I just read that as being PAYE and Self-employed or more than one PAYE source.

I have had clients where they wanted allowances in SA rather than coding despite the cash flow issues in order to fit their particular needs.

My experience too.

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Stepurhan
By stepurhan
30th Apr 2014 13:15

Learn something new

Well, I never knew you could ask for your code to be used up by self-employment. As has been said, bad for cash-flow, and it won't even eliminate if self-employment is higher than the personal allowance. Still good to know for those clients who know they won't put money aside but want to ensure tax is paid.

Thanks for that.

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By vinylnobbynobbs
30th Apr 2014 15:02

Thank you

for your replies.  It is not as simple as that and i didn.t want to post a long explanation.  However, HMRC say they cannot code out the underpayment against one source of income because it would double the amount of tax due.  However we have argued that by splitting allowances between the 2 sources of income then the underpayment can be collected and it is even less than 50% of the tax charged.  We have submitted a full explanation and calculation on how they can do this but their reluctance to do what we ask seems to be a failure on their computer system and not a question of law.  We have asked HMRC for their clarification on the law and are awaiting their reply - thankfully we are also using an Agent Account Manager and their respondes are fairly (but not very) quick.

 

 

 

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RLI
By lionofludesch
30th Apr 2014 15:15

Computers

There should be a "common sense" over-ride facility in every program.

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Replying to Vile Nortin Naipaan:
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By vinylnobbynobbs
30th Apr 2014 15:18

This is HMRC we are talking about!

lionofludesch wrote:

There should be a "common sense" over-ride facility in every program.

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Stepurhan
By stepurhan
30th Apr 2014 15:15

Limits on deduction

Refusing to code out an underpayment because it doubles the tax due is HMRC policy, but has no statutory backing. Insisting, pointing this out, has worked in the past.

A coding cannot result in more than 50% of gross wages being taken in tax, which may or may not be relevant to your client.

Assuming you don't fall foul of the latter (either before or after the split) then AAM should be able to sort you out.

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Replying to Accountant A:
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By vinylnobbynobbs
30th Apr 2014 15:21

Yes

stepurhan wrote:

Refusing to code out an underpayment because it doubles the tax due is HMRC policy, but has no statutory backing. Insisting, pointing this out, has worked in the past.

A coding cannot result in more than 50% of gross wages being taken in tax, which may or may not be relevant to your client.

Assuming you don't fall foul of the latter (either before or after the split) then AAM should be able to sort you out.

 

This is what we are thinking however, the AAM is not exactly being pro-active here.  He is merely passing our e mails on to the "service group" who parrot fashion report their instructions back to us. 

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RLI
By lionofludesch
30th Apr 2014 15:27

Ask them for ....

..... a statutory authority for denying your very reasonable request.  Point out that your client is doing his best to manage his debt to HMRC.

This ploy has worked really well for me in the past.  Even if there is a statutory authority, the officer usually can't be bothered to look it up.

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By Marion Hayes
30th Apr 2014 15:44

Over-ride

is possible. Last year when this started to come up there was a thread which gave the sam[ple wording to quote which solved the problem. Maybe someone has it flagged?

Having said that you can ask for the underpayment to be treated outside of the system under a payment arrangement. If you look in their manuals for the ways to deal with stranded underpayments you should find their procedres for this.  Paying over 1 year should be easy to arrange. It's the longer periods which can be problematic.

 

@stepurhan - its like the classic millionaire quote - the answers are always simple when you know them. In our case untill you come across something in practice no-one can know everything. Thats why this forum is so useful. We oldies ( not necessarily you I hasten to stress) remember the dark ages and youngsters bring us up to speed on newer aspects. And in the middle is where you know what happens because yoou already made that mistake a million times before.......

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Replying to johngroganjga:
Stepurhan
By stepurhan
30th Apr 2014 16:01

Oldies

Marion Hayes wrote:
We oldies ( not necessarily you I hasten to stress) remember the dark ages and youngsters bring us up to speed on newer aspects.
I remember when CIS was SC35, so I probably qualify. ;-)

There is just too much tax and accounts law for anyone to know everything. I like to think my wide practice experience has taught me a lot, but I still get caught out with the odd thing that has been in place for years. We live and learn.

On topic, asking for statutory authority is always a good card to play, especially when you know there isn't one. Odd about the AAM though. I used them a little while back and they resolved my issue very quickly.

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Replying to memyself-eye:
RLI
By lionofludesch
30th Apr 2014 17:20

Older

stepurhan wrote:

Marion Hayes wrote:
We oldies ( not necessarily you I hasten to stress) remember the dark ages and youngsters bring us up to speed on newer aspects.
I remember when CIS was SC35, so I probably qualify. ;-)

I can remember when there was no CIS scheme.

:-(

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By Marion Hayes
01st May 2014 16:57

mmhhh

So can I!!!!!!

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By User deleted
01st May 2014 17:29

Calculation of income tax liability is given in s.23 ITA/07. Step 3 allows deduction for personal allowance.

 

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