HMRC proposes tax code delay

HMRC has proposed changes to PAYE legislation which would mean it could wait up to 30 days before telling employees their tax code has changed.

The Revenue said that having discretion about when to inform taxpayers about changes to their tax codes will help it improve its service.

Under the proposal HMRC will be able to delay sending letter to employees telling them about a change to their tax code for up to 30 days after their employer has been informed.

Continued...

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Comments
TaxTeddy's picture

Setting service standards    5 thanks

TaxTeddy | | Permalink

There's a dreadful Kafka-esque logic about HMRC improving service by not telling taxpayers what they are doing.

Taken to it's logical concision, they should tell us nothing at all - at which point the service would be impeccable.

What they ought to do is get    1 thanks

ireallyshouldkn... | | Permalink

What they ought to do is get them right first time and thus avoid lots of calls to HMRC to sort out all the wrong ones, instead of issuing 4 or 5 mad ones over a period of 4-6 weeks as seems to be the main method of operation. 

Classic HMRC - dont fix the problem, try and manage it my lowering their own targets. 

 

stepurhan's picture

Arse about face    5 thanks

stepurhan | | Permalink

As Leslie Fidler says, it would make more sense to do it the other way around. Only employees can query whether a tax code is correct. Therefore they are the ones that should have the opportunity to correct it before any incorrect calculations are made. To instead leave it 30 days effectively guarantees at least one period in which an incorrect code would be used.

Improve their service? They mean penalise taxpayers in a vain attempt to disguise how rubbish their service is.

julian.sims's picture

Agree with stepurhan

julian.sims | | Permalink

Have to agree absolutely with stepurhan.  There is no logic to advising code to employer who has to apply the code without notifying employee who has ability to challenge the code.  It would of course be reasonable to notify to taxpayer first allowing them to challenge and HMRC to correct before sending to employer.  This would at least save the employer having to make multiple changes.

If HMRC can't manage the volume of calls, and doesn't agree with the above, why not just delay issuing the codes completely for 14/30 days until they have the manpower to do so.  That would be better than the proposal.

Consulting?    1 thanks

jcace | | Permalink

I wonder with whom HMRC are consulting. I can't see any consultation document on the .gov website where all the other consultation documents are publicised.

Ruddles's picture

It's a joke    2 thanks

Ruddles | | Permalink

(just not a very funny one).

Whenever our payroll department receives a new code for an employee (own or client's) the first thing they do is email the employee/client to ask if the code is in order. How is that going to work under the proposals? I can envisage the situation - perhaps I'm being a little too cynical/pessimistic  - where the employee calls up HMRC to check only to be told that there is nothing to check, because the employee's code details aren't yet on the system.

Either way, in our case, the delay in sending out the employee copy will do nothing to stop the phone calls being made - in fact, it will only increase the number, because the employee will not be able to confirm to the employer that the code is correct without contacting HRC.

mr. mischief's picture

just when you think it can't get any worse...

mr. mischief | | Permalink

It does!

At 2pm today I met with a client who was self-employed for part of the year then an employee for the last 3 months of 13-14.  The payroll person in her employer is a real novice and there are 20 or so staff who finished 13-14 on week 1 tax codes despite having presented the payroll person with P45s.

My client is one of those.  In addition although my client earned £7k on her P60, the payroll prat managed to deduct over £300 in Student Loan tax from her.  Now my client is fine as we'll submit her self-assessment form in the next week and that should sort out the mess and generate her tax refund - 7,555 of pay on her P60 and 1,189 of tax, plus 300 student loan tax you can't make this stuff up!

Of course the majority of the rest of them will not be in self-assessment so will need to hope HMRC refund them in the end of year adding up process, and we all know how wonderful that can be.

So to HMRC I say NO NO NO.  Get the codes right with more frequency, what is the point of RTI filing if you can't do this?  (Cynics might say it is just to generate more fines.)

 

Prats

thomas34 | | Permalink

So HMRC want the option of not issuing coding notices to taxpayers at a time when the said taxpayer may possibly telephone them with a query and they're too busy to answer the phone.

Proof, if proof were needed, that the system is not fit for purpose.

 

Euan MacLennan's picture

Eh?

Euan MacLennan | | Permalink

mr. mischief wrote:

At 2pm today I met with a client who was self-employed for part of the year then an employee for the last 3 months of 13-14.  The payroll person in her employer is a real novice and there are 20 or so staff who finished 13-14 on week 1 tax codes despite having presented the payroll person with P45s.

My client is one of those.  In addition although my client earned £7k on her P60, the payroll prat managed to deduct over £300 in Student Loan tax from her.  Now my client is fine as we'll submit her self-assessment form in the next week and that should sort out the mess and generate her tax refund - 7,555 of pay on her P60 and 1,189 of tax, plus 300 student loan tax you can't make this stuff up!

Of course the majority of the rest of them will not be in self-assessment so will need to hope HMRC refund them in the end of year adding up process, and we all know how wonderful that can be.

So to HMRC I say NO NO NO.  Get the codes right with more frequency, what is the point of RTI filing if you can't do this?  (Cynics might say it is just to generate more fines.)

What has a "payroll prat" failing to operate PAYE correctly for an employer got to do with HMRC?

I agree with everyone else that if they cannot be sent out at the same time, PAYE coding notices should be sent to the employee before the employer.  I suspect that HMRC's dificulty is the means of communication.  These days, most employers are notified of PAYE codes online, but all employees get their coding notices in the post and we all know how slow the HMRC posting process is.

JAADAMS's picture

Accountingweb will submit your concerns...

JAADAMS | | Permalink

As part of my remit for accountingweb I submit responses to HMRC/BIS consultations.

From your comments above this is obviously something that is worrying to members and as such I will pull together your comments and submit a response on members behalf.

I will also be sending a link to this article to the head of Working Together.

So anyone else who would like to comment please do so.

Thank you.

mr. mischief's picture

re. payroll prat

mr. mischief | | Permalink

What has a payroll prat not doing things properly got to do with HMRC?

This.

We are now in Real Time Information.  Every month HMRC is put into a position to correctly assess the in-year tax position of every single PAYE person in this country, or at least the vast majority of them.  I think it is perfectly reasonable to expect them to use this data, in fact it is a lot more reasonable to expect this than their current attitude to start fining everyone who is a few days late from October.

Taking the specific actions of the payroll prat which ran from January to March, HMRC had all the information they needed to see that no Student Loan deduction was due, and that the wrong PAYE code was being applied.  HMRC choose not to allocate any resources to sorting out this stuff in year, that is their call.

I am fine with that so long as NO FINES are levied on employers for late submission of data by a few days - data HMRC are not going to bother doing anything with for months.

 

.

ireallyshouldkn... | | Permalink

A lot of clients find it very hard to even understand their tax code, so even if they do get the letter they may not really know what questions should be being asked by themselves of HMRC

Secondly it would be helpful if HMRC did not send out "multiple codes" over a short space of time. It seems very common for 2 or 3 changes in code over a period of a 2-3 weeks leaving the tax payer rather bemused.

JUst to add to the discussion

pauljohnston | | Permalink

my son is a student and is trying to get work (money) where ever he can.  He has a job at Uni but that only pays during term time.  He has a very part time job in the holidays (July-Aug).  In june he worked at one of the stations handing out leaflets.

HMRC have now decided his tax codes and what a farce.  As Mr Cheeky says with RTi the tax codes should be changed in the next month.

The upshot is that my son is deducted tax despite the fact that his total earnings will be no where near £10,000.  Yes he can get the tax back when P45s are issued but it seems to me that the current tax system is not fit for purpose despite the £400m computer and RTi.

Politicians get a grip - it appears that if you work for more than one employer at the same time your systems can't cope and it is those at the bottom of the earning ladder who need all his/her income to survive are those that suffer because of this uselessness.

 

consultation

dmmarler | | Permalink

If anyone can find where the consultation is on the HMRC website can they please let us all know? We can then comment and it will be on the record for when PAC starts grilling HMRC about this madcap scheme and why everything is going wrong.

raybackler's picture

Not to mention pensions!

raybackler | | Permalink

Just when people retire is the worst mess.  The system can't cope with multiple employers, multiple pensions and in-year changes in status from self employed to employed or vice versa.  Meanwhile employees think that it is the employer or accountant at fault when they get a wrong tax code and they generally don't think it is their problem to sort out.  What a disaster!!  RTI has automated a system that was already wrong and exposed the existing system for what it was - a shambles.

Client Queries

daymar | | Permalink

We often have queries from PAYE clients as to why their tax has suddenly increased in a month - which is due to new tax codes. So now we could have the situation where HMRC can issue a new tax code taking more tax, and the employee has no knowledge of why a new tax code has been issued for a further 30 days, Then he or she will could have had up to 2 monthly payrolls with extra tax deducted which may be a mistake. This affects the monthly cash flow of such people, which can cause them financial difficulties if HMRC have made a mistake - which happens so often. The next round of mistakes will come soon when HMRC start taxing expenses from P11D forms despite the submissions of section 336 claims, which we then have to notify them to cancel.

Are taxpayers still customers?

StephenGuy | | Permalink

If HMRC tell employers to operate new PAYE codes without telling the taxpayer (for up to 30 days), the first the taxpayer will know about their new code is when their pay changes.  

I guess HMRC has given up the pretense of taxpayers being 'customers'.  No-one would treat a customer like that and expect to keep them. If only we had a choice of tax authorities!

One word - Wrong!

blueskies | | Permalink

Two words - What the ....?

 

and the EU?

dmmarler | | Permalink

My colleague thinks it would be a good idea - while we are in the EU - if we should be able to chose our individual tax authorities under the Single Market expectation.  Great way to standardise taxation ...

HMRC create more work for everyone

Aspyre | | Permalink

This policy would make more work for everyone! Only today we received a tax code notice as agent for a company director for whom we prepare the tax returns. We couldn't access the employees coding notice , from where we could examine the reason for the change. So it was a phone call to HMRC for their explanation. It was of course computer generated following submitting the self assessment return. Of course we didn't want this code change as it would mean an overpayment of tax in the year so we had it changed back again but only after being questioned as to our reasons. That's another 15 minutes of non chargeable time as this was a fixed fee client!

The devil (and the saviour?) is in the detail

rbw | | Permalink

I think HMRC’s communications about this change are abysmal but I am puzzled by some of the reactions. 

First:

a.       the changes are not only to delay the issue of a code to an employee but also not to issue a notice at all.  See reg. 2(3) and para 7.4 of the memorandum; but

b.      this is only where “the employee or annuitant has no tax to pay”.  That is, not the general run of employees etc

Main question for HMRC: who are these people in practice?  Surely informed consultation (not to mention Parliamentary approval) needs better explanation.

Second, the draft regulations have in the proposed new reg. 17(2):

“(c) the employee’s PAYE income is not chargeable to tax; or

(d) the employee does not have a liability to tax in respect of his PAYE income(b).”.

This leaves me scratching my head on some points of detail.  I’m probably lost in the mire but FWIW:

a.       there is already provision for a “flat rate” nil code if HMRC think income will not be chargeable to tax so does (c) cover just those?  Presumably not but what then?

b.      while I can see there is an additional group where “the employee does not have a liability to tax in respect of his PAYE income”  don’t they end up with a nil code in practice too under reg 14?  Presumably not.  But again, who then are these folk?

c.       v much a pedant’s point: shouldn’t this be drafted as what HMRC have reason to believe (as with much coding etc) given liability cannot be determined before the end of the year?