P0700 is a DTC stored in the Engine Control Module that serves as a flag to indicate that the Transmission Control Module has set a DTC and is reporting that it has detected a failure that will effect emissions. Generally only a fairly aggressive chip or programmer horsepower setting will cause this DTC to set and cause the transmission to default to fourth gear. The typical DTC to set in the Transmission Control Module is P0735 (Incorrect Fifth Gear Ratio). This will, in turn, cause a P0700 to set in the Engine Control Module. What happens?
When running power levels about 100 horsepower over stock, the Allison’s fifth gear clutches can potentially slip, causing this DTC to set. The actual slip threshold varies between transmissions and manufacturing variations. It also seems to vary between power programmer or chip manufacturers. In my experience, I have found in tuning that aggressive power has to be ramped in smoothly to prevent the Allison from slipping in fifth gear. In other words, before the torque builds to that critical point, the transmission should have already downshifted to fourth gear. The fact is that most power programmers or chips are not engineered to account for that detail. Some will cause the Allison to slip during normal driving at 80 HP settings, while others will only cause an Allison to slip when under heavy load at the 100 HP setting.
One of the drawbacks to having an Allison slip and a P0735/P0700 DTC combination is that the clutches are now glazed and will not hold quite as much torque as they would new, making the problem worse than it was. Usually the only practical solution is to turn down the power level on the programmer or chip. Otherwise, expensive modifications will need to be made to the Allison in order to get it to hold higher power levels. The newer six-speeds generally have a better tolerance to higher horsepower levels, but it is still possible to slip the overdrive.
Even if the transmission has slipped a few times, there is generally no major internal damage to worry about. The transmission controller is quite sensitive to slip and will default the transmission to fourth gear to protect the clutches and components. It is a good idea to monitor the transmission fluid smell and color if the transmission has slipped a few times, checking for a burnt odor or a brown/black color.