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Policy change for coding out?????

Having submitted quite a few 2008 tax returns (which wasn't without its problems thanks to our software having numerous 'issues') I have received the updated statement for one of my clients which not only has the July 2008 POA coded out but all of 2009's. The liability was £2,942.71.

It would appear that there is a new question on the 2007/08 tax return, on page 6 - If you owe tax for 2007/08 & have a PAYE tax code, we will try to collect tax due (up to £2,000) through your tax code for 2009-10, unless you put an 'x' in the box. This INCLUDES any outstanding POA's. So my clients July POA has been coded into 2010. This crazy move means that the 'tax outstanding' is effectively nil (We all know that isnt the case) & HMRC have cancelled her 2008/09 POA's!!!!!!

If you map this forward to 2012. It means that instead of paying £1,600 every 6 months, she will pay around £4,500 every 2 years, until her source of PAYE ceases, then coding out must stop & if she is still in the same position will owe nearly £10k in 'catch-up' payments.

Having spoken to a tax specialist & HMRC they have confirmed that this year the policy has changed, but once everyone starts querying their bizarre statements & PAYE codes, how long will it be before they reverse their decision - moving us into even more complications? I can’t see that everyone at HMRC will understand the change, our software providers definitely don’t & we are faced with having to manually adjust all of our client accounts.

Stacey

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08th Jun 2009 10:05

12m on and same thing still happening!!
Just checked online to see one of my client's 2nd poa for 2008/09 of circa. £1,800 [total 2008/09 liability circa. £3,600], due July 2009, is to be coded out so balance due per HMR&C this summer is £Nil. This seems to arise because of my appalling over-efficiency in getting 2008/09 return to HMR&C before the 2nd 2008/09 poa is due. Must remember to be slower in future(?).

Surely this is ludicrious as, as pointed out in previous post/replies, massive tax payment is building up in 2011.

Did anyone have any joy at the "Working Together" meetings with this point?

Anyone else any comments to help me?

Should I simply get client to pay July 2009 and hope it is not repaid?!

Regards, Alasdair

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10th Jul 2008 11:09

Exactly
Apparently it now works on amounts of tax due, so because my client paid her POA in January, the amount now due is under £2,000. Her second POA is also under £2,000, so they have both been coded out!!!
It's a point I am taking to Working Together & I am really not looking forward to explaining it.

Regarding your point 3, yes, you are correct, it's just our software that has always dealt with it in reverse & is now totally confused & we have to manually override it. Now we are aware that IRIS has been reversing our answers, we are making sure that every single return is ticked.

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09th Jul 2008 21:13

Eh?

1. The liability is £2900, that's £900 more than their coding limit. Why are they coding it?

2. If they want to collect the tax via PAYE, they also need to "code out" the income. The 2008-09 code should have an adjustment to collect the tax due for that year. The 2009-10 code will collect the tax due for that year as well as the amount unpaid for 2007-08.

3. The X in the box question has always been there. I suggest you tell them not to code the income or the tax due and always pay per the normal SA rules. Its much easier to to keep on top of it.

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