My client ceased his self-employment on 30 September 2022 and started a part-time PAYE employment on 1 October 2022. His only other income is basic State Pension and he has no savings. We applied for 2022/23 payments on account (based on the 2021/22 liability) to be reduced and both reduced installments have been paid.
The revised payments on accounts left a small balance remaining, and by not ticking the relevant box on the 2022/23 tax return, we applied for this balance to be coded out in 2024/25. HMRC is insisting that this can’t be done, that the balance should be treated as payments on account still outstanding.
In a recent query (Self-assessment 2nd interim coded out, 26/06/23), John R pointed out that the legislation supports the opposite view. His posting indicated that the tax to be coded out for my client would be the 2022/23 liability, less "payments on account made by him" rather than "payments on account payable by him". He references Income Tax (PAYE) Regulations 2003 Sec 186 and TMA 1970 Sec 59B(1).
Is HMRC right in disallowing my client’s application to code out the balance of tax in this case?