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PAYE coding headache continues into new tax year

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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