BR Code

I am currently dealing with a PAYE underpayment case. I had always assumed that where an employee did not provide a P45 to a new employer that if a BR code was used it would automatically collect tax on earnings above the standard rate threshold at the higher rates. I am surprised to discover that the BR code only deducts standard rate tax from all earnings regardless of whether the amount is above the relevant threshold. In this case a consultant with monthly earnings in excess of 5 figures (excluding pence) each month. Being taxed at 20% on PAYE led to a very large underpayment over a three year period.

It seems such an obvious weakness in the PAYE system that I wonder why it was ever written into payroll systems in this way. Even the old manual tax tables didn't allow substantial underpayments to arise in this way. 

Presumably payroll systems have to be compliant with HMRC requirements why have HMRC not specified that payroll systems have checks built in to prevent potential underpayments arising from certain codes. 

Can anyone explain why payroll systems are written to allow this?

 

Comments
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Its a valid code

vince8 |

BR deducts tax at the

ACDWebb |
ACDWebb's picture

so as BR only ever takes the Basic Rate

lisler |

Because

ACDWebb |
ACDWebb's picture

Why didn't the consultant query the BR?

Chris Smail |
Chris Smail's picture

Why 3 years

Democratus |
Democratus's picture

You would expect,

ACDWebb |
ACDWebb's picture

A N Z T

vince8 |

Why am I surprised?

lisler |

Because

ACDWebb |
ACDWebb's picture

I am rusty on payroll

ShirleyM |
ShirleyM's picture

@ShirleyM

WhichTyler |

@WhichTyler

ShirleyM |
ShirleyM's picture

Some employees strain sympathy, to be honest

TomMcClelland |
TomMcClelland's picture

Just suppose ...

Old Greying Accountant |
Old Greying Accountant's picture

ANZT

Dido63 |

stretching things a bit

lisler |

May be ...

Old Greying Accountant |
Old Greying Accountant's picture

Not an improvement, in my opinion

TomMcClelland |
TomMcClelland's picture

The default for no P45 or P46 returned by employee

ACDWebb |
ACDWebb's picture

Like ACDWebb

ShirleyM |
ShirleyM's picture

More sensible

lisler |

Three years?

SwanseaJack |

Indeed, but HMRC refuses to see it that way

TomMcClelland |
TomMcClelland's picture

Depends on your point of view really

ACDWebb |
ACDWebb's picture

Not always the fault of HMRC

Euan MacLennan |
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