2010/11 PAYE codes latest

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2010/11 PAYE codes latest

by Tax Faculty Team on 16.03.2010 11:48 17 comments 4192 views
Topics: PAYE and employers

Employers may not operate the code the employee has been sent

In a recent news item we explained that employers may not receive P9 notices for all employees in time for the April 2010 pay run. We have just been advised that some employees have been sent revised PAYE codes, but their employers haven’t. This means that the code which the employee was sent will not be operated by the employer, who must instead continue to operate the 2009/10 code. As a result, employees may, at least until the code is corrected, overpay or underpay tax in 2010/11.

The reason this is all happening is that when the annual coding exercise was undertaken and 2010/11 tax codes sent to employees in January, HMRC discovered that there were errors in many of the codes. It therefore started a programme to review the codes which had been sent out and which it had identified as being most at risk of error. It is now apparent that the exercise will not be completed in time for the start of the new tax year and, where HMRC has not yet finished the review, the employer will not receive a P9 notice for that employee for 2010/11.

Employees most likely to be adversely affected by the 2009/10 code being rolled forward to 2010/11 are:

Pensioners and others receiving state benefits because the amount of benefit included in their code does not reflect the annual uplift. HMRC is prioritising manual reviews of codes for this group;
Those with company cars and fuel benefit because benefit charge increases for 2010/11 will not be included;
Those on incomes of over £100,000 who will receive the personal allowance when they should not have done.

These groups will all underpay tax until a revised code is issued.

In addition, anyone whose 2009/10 code included a reduction or addition which is not recurring, for example collection of SA underpayments, one-off benefits, larger-than usual pension payments, will pay the wrong amount of tax.

HMRC is also repeating its earlier messages that where a code is wrong, it is very keen for the taxpayer to make contact as soon as possible so that it can update the code and its standing data. Without contact from the taxpayer or their agent, HMRC may be using a certain amount of guesswork when attempting to correct the position on review.

How will employees know they are affected?

They won’t unless they check. HMRC will not be contacting the employees concerned. Those whose codes are still being reviewed (so their employer has not yet been sent a P9) will only be aware that the code they were sent has not been operated when they get their first payslip for 2010/11 and compare the code shown on it to the new one they received from HMRC.

Employers need to be aware of this issue in case employees query the code being operated.

Comments

# | by Michael Quinlan on 16 March 2010, 17:39

HMRC are very keen to hear early from taxpayers with incorrect codes... Eh!!! In one case, I have written twice, faxed, emailed and tried to phone (never picks up at Bootle non-resident unit). I have heard nothing, not even an ackknowledgement in over a month. No new codes issued either. What is happening with HMRC. This reminds me of the mid 1970s when IR couldn't reply to correspondence in less than about three months. Regards Michael Quinlan

# | by Ian Vogan on 16 March 2010, 17:59

Am I being over cynical to suggest that HMRC are being used to defer the loss of personal allowances, which is being kept low profile, until after the presumed general election on 6 May? I know HMRC are supposed to be politically neutral, but I have heard David Hartnet speak.

More seriously, what can be done to get major changes at the top in HMRC?

# | by Michael Trigg on 16 March 2010, 18:28

A more significant area of error that we are finding is the lack of allowance for business expenditure funded personally and business expenditure incurred on credit cards (BIK) which are then reclaimed as expenses. HMRC is including the expenditure but not the expenses claim.

We have also noted a significant increase in the delay in responding to normal correspondence. This is now rapidly creaping towards 10-12 weeks.

# | by Richard Morgan on 17 March 2010, 09:53

I agree with Michael Trigg. Almost every P9 we have received this year (more than 200 of them) is incorrect because of the inclusion of business expenses. The administrative effort in having them changed is considerable for our small practice; I would hate to be running Digita's payroll department! It seems to me that HMRC could fix this problem by linking the SA return and PAYE coding data, which must be being done anyway in order to to 'code out' small SA liabilities into the following year's PAYE code.

# | by John Hyde on 17 March 2010, 22:53

WHY WHY WHY is always OK for HMRC to C**k-up, sans any penalties or comeback, while it is taken for granted (certainly for the next tax year) that if there are any delays on our, or our clients' parts, WE ARE GUILTY BY DEFAULT and can be fined instantly, AND it appears, HMRC wants the whole country to become PAYE Coding Experts - without pay or even a pen or pencil to thank us for doing a considerable part of their job for them??????? IT JUST STINKS!!

# | by Christopher Nurse on 18 March 2010, 12:54

Several clients have received codings that include property income that HMRC wants to code out but it is not in the clients' interests. They have been very relucatnt to revmove it from the coding. Also, dividend income has been coded out, resulting in clients both making paying POAs as well as having additional tax deducted through coding.

# | by Angela Williams on 18 March 2010, 18:26

Michael Trigg and Richard Morgan identify an issue which we know will not be fixed in the foreseable future. It is enormously frustrating for taxpayers and agents to have the continuing mis-match between expenses being claimed against income and expenses reimbursed by the employer. The reason for this is that the information on expenses reimbursed flows from the employer at one time and that for expenses claims from the employee and a different time. We bring this issue up with HMRC regularly but so far no one seems to have been able to come up with a workable solution. We'll keep trying.

The point which Christopher Nurse raises is being taken forward through Working Together and as yet, HMRC has not advised what underlying issue is causing this to happen. HMRC should remove the adjustments (which shouldn't have been there in the first place) when asked. It is quite clear on this page in the manuals: http://www.hmrc.gov.uk/incometax/non-paye-income.htm "If you don't want to pay tax on your other income through your tax code you can ask us to stop collecting it this way and pay through Self Assessment instead." If you have persistent problems having this done, we can investigate if you email details and provide the NINO. Alternatively, ask to speak to the supervisor at the Conatct Centre.

As for long waits for responses to letters and phones not being answered, what is now being referred to as the PAYE codes fiasco has probably made this even worse.

# | by Tax Faculty Team on 19 March 2010, 13:03

The Tax Faculty advises: At the Employer’s Consultation Forum yesterday, HMRC emphasised that employers should follow strictly the rules relating to tax codes and use either the P9s for 2010/11 that have been sent to them or roll forward 2009/10 codes if they have not received a P9 for the employee. Employers must not use the code shown on the employee's P2 even where they have been given or sent this.

# | by John Brain on 23 March 2010, 10:49

I agree wholeheartedly with John Hyde's comments of 17th March.My recent experiences indicate that a large proportion of Coding Notices received by my office in the last few weeks are dated back in January.What chance do we have to correct any errors before the new tax year commences when it takes weeks now to get a response to correspondance and telephone communication is a waste of time.

John Brain

# | by Anonymous on 26 March 2010, 09:09

PAYE coding notices 2010 - 11 Received this week several of the above dated 14 January 2010, 16 January 2010, 31 January 2010 and 1 February 2010. I always assumed that a letter/doument is dated the same day as it is posted. Are the 'rules' different for HMRC?

# | by Colin Williams on 30 March 2010, 12:53

Also, I seem to have a number of cases where the reverse is true. The employer has received a P9 but the employee is unaware of the new coding because the P2 has not arrived and therefore cannot query the code with HMRC.

# | by David Heaton on 08 April 2010, 15:37

HMRC confirmed today that no more P9s will be issued. Any code changes from now on will by P6, to which the normal rules apply, ie, use the new code for any future payments.

# | by Angela Williams on 12 April 2010, 13:39

For those who have commented on the dates on P2s and delays in arrival of codes:

HMRC asked the postal service to hold back delivery of PAYE codes when it became apparent in January that there were problems with many of the codes which had been printed. These stockpiled codes were then delivered in late February and March, sometimes after an amended code with a February or March date had been issued. It is therefore important to check the issue date of a code to ascertain the most recent one.

# | by Michael Trigg on 12 April 2010, 15:42

It seems to me that we have a large HMRC confusion. I can see a number of instances where PAYE scheme operatives are going to be unaware as to which code they should be using as the last coding notice may not be the valid one, as HMRC held back the delivery of earlier versions.

How is an operative to know as to whether the latest received notice with an earlier date is a delayed delivery notice, because HMRC believed it to be incorrect, or an incorrectly dated but correct notice?

How many operatives are actually going to look at the dates that carefully to realise that the second notice that they receive is actually the first and that no action should be taken on receiving it?

What a mess?

# | by Angela Williams on 12 April 2010, 16:53

Michael, it is only the P2s which went to taxpayers and agents which were affected by the mail delay mentioned above. Employers must not operate a code from a P2 notice, only from a P9 or P6.

# | by Michael Trigg on 12 April 2010, 17:04

Angela, why were we receiving forms P9 and P6 dated January 2010 in late March early April 2010?

# | by Malcolm Heard on 14 April 2010, 12:57

I must echo the complaint that penalties are levied at every opportunity by HMRC but failures "on the other side" continue without much concern at all. The lead paragraph on the HMRC website refers to the new penalty regime - for our side. It makes the current political announcements about responsible public services rather hollow.

Today (8 days into 2010/11) I have received a P2 coding notice dated 28th March 2010. Anyone explain what possible use such a code will be to anyone ? It accompanied a 2010/11 code. If you send rubbish out, you can not complain about jammed phone lines and backlogs in correspondence.

For most SA clients and unless it causes financial hardship, we no longer go into battle to get codes changed as I only have 9 years before retirement !

My concerns are with elderly retired taxpayers who have no one acting for them who are probably living in ignorance of the errors. A recent case we found involved reviving the Married Couples allowance when the wife died 4 years ago.

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