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Dynamic coding and SA

Pretty sure I fooled HMRC

Client has a small pension, subject to PAYE, NIRP and some rental income. 2017 Return has a small underpayment, though more than the PAYE tax that would be deducted at source. As such, the underpayment does not qualify to be coded next year, and should in strictness be paid on 31 January 2018.

However, HMRC adjusted client's CY code in September, which put her on a K code, and the tax deduction on the K code will be more than the SA tax payable. The reason for the current K code is an estimated CY underpayment on a slight reduction in code, calculated via dynamic coding. My expectation is that the underpayment is grossly over-estimated, and so PAYE this year will be overpaid.

Nevertheless, I've still convinced HMRC to code the SA underpayment in 18/19 on the basis that tax payable based in the current tax code will exceed the SA liability.

I simply do not believe that this is correct, and that their decision should be based on likely PAYE liability next year, which will be considerably less than the SA underpayment.

Do others agree with my view that I have, effectively, hoodwinked HMRC?

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