PAYE coding headache continues into new tax year

by Santhie Goundar

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23 Apr 2010

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Tax advisers are still handling erroneous PAYE notices from the taxman, despite the majority of the much-publicised notices having been sent out before the beginning of the tax year.

Peter Mitchell, chairman of the Society of Professional Accountants, which represents roughly 1,400 small firms, estimates that “as many as one in five” tax coding notices this year may be wrong – and tells us that some firms are only this month receiving tax coding notices dated from February this year.

“A number of members have reported back to us with this problem,” Mitchell said.

“Firms have generally been using their own resources in sorting these out for their clients, and can’t recover or bill the time for it. The majority of small practices will just have to absorb it. It’s provided yet more admin for practitioners.”

In theory, tax coding errors should be sorted out quickly, with a phone call to HMRC. David Butler, tax consultant at BKL, said that “changing them over the phone is a relatively simple process”.

“Most of the problems were resolved quickly, although it did depend on the competence of the person we spoke to and it did sometimes take a couple of attempts,” said Butler.

However, Jonathan Russell, past president of the UK200Group and partner at ReesRussell, indicated that some took longer than a simple phone call to sort out. “A significant number, if not a majority, of our clients have been affected,” he said. “We don’t know how long they will take to resolve as [HMRC] are only accepting letters, having told us they cannot change anything as a result of a phone call and it must be put in writing.”

The tax code corrections saga is probably still likely to run in the next few weeks, as accountants have to check and confirm with clients – even after this new tax year has started – that the new codes received are correct. And that’s just for those individuals that were aware of the tax code error in the first place. Butler added: “The April payslips are likely to make any anomalies stand out to anyone who missed or ignored their January PAYE code, so there could be another peak.”

A spokesman for HMRC said: “HMRC has taken swift action to identify the types of codes that were affected by the recent problems and have held these back for review before any notices of changed codes were issued to employers and pension providers, including [notices] that might have echoed incorrect codes already sent to employees or pensioners in January and February.

“As a result of this, the normal issue of codes for the new tax year has been delayed, and some will not be issued in time for implementation in April while the review is completed.”

Further reading:

HMRC warns on tax code errors

PAYE security attacked

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