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Adjustment for estimated tax you owe

Do we need to put up with this?

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Genuine question!

We have had a slew of PAYE codes for clients where HMRC have updated the code (which we tend to agree with, as far as estimates go), then added an adjustment to catch up (so to make it all level with if they had used the new code all year - I would have called that a cumulative code, but every single code I have seen in the last few months has been W1/M1 so I assume HMRC no longer use cumulative codes?).

Most of my clients are of the opinion that they are in self assessment and so, rather than have a sudden massive pay cut this month based on what tax they may owe over the year that isn't even finished yet, would rather (I believe it is called) 'self assess' and pay any tax that is actually due in January 2020.  Some go so far as to want everything out of their code of course, which again I have always accomodated (with the obvious caveat 'you will have to pay it later, so you are happy with a lump sum rather than smaller chunks?  Yes?  Fine, I'm on it!).

Now all of a sudden HMRC are refusing to change this estimate, saying they are obliged to pay it under the PAYE system.  Am I being daft or are clients not entitled to do whatever they like to their PAYE codes, provided they are in SA, up to and including stripping them to the bone and paying more the following January?  I suspect I am about to get a lot of grief from clients whose codes have just gone from xxxL to Kxxx X and suddenly have lost half their salary...

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26th Sep 2018 15:53

We have been pulling them out although haven't removed one for a while.

Was it just one operator at HMRC's end refusing? Or several instances?

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to ireallyshouldknowthisbut
26th Sep 2018 16:14

ireallyshouldknowthisbut wrote:

We have been pulling them out although haven't removed one for a while.

Was it just one operator at HMRC's end refusing? Or several instances?

As it turns out, just one, a call back and the second person was helpful. But other people in the office have had similar experiences, so either there are a batch of HMRC people who don't know it's possible or it is a New Rule which a lot of them are ignoring...

Probably the former.

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26th Sep 2018 16:35

According to their Agent Webinar last year when 'dynamic coding' was introduced the reason is that 'customers' would prefer to have the tax collected in the year it's due (hence the u/p adjustment, rather than a 'double charge' the following year (once for the in year liability and again for the PY u/p).

Utter toss of course and the views given suggested very little understanding of the real world

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26th Sep 2018 16:37

I had one today - in SA but also receiving a pension (fire service). He has this month had his tax code cut to 800 odd, reducing his net pension with no explanation (yet). He owes - will owe - £800 in SA tax on 31 Jan 2019 but it looks like HMRC are collecting it now..

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By gordo
26th Sep 2018 19:35

HMRC published objectives are to “maximise revenues” and we are starting to see it everywhere https://www.gov.uk/government/organisations/hm-revenue-customs/about

It’s all driven by the size of the debt £2.4bn and the deficit £400bn once you factor in the increase in public sector pension liabilities.

When a company is in trouble it often tries to accelerate income.

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By Matrix
26th Sep 2018 20:16

The agents helpline has always changed them for me including today when I had dividends taken out of a code which were added due to a recently filed tax return.

Client was dangerously near to losing PA so I had to give them a warning that if they receive dividends of X then the effective tax rate is very high and they will need to put aside the tax since they have chosen not to have the estimated dividends in their code.

Usually it is the other way round and clients have big bills due to loss of PA, the one time HMRC picked it up I had to adjust. Will remind client when they moan about their tax bill next year.

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By SXGuy
26th Sep 2018 22:17

What annoys me is when hmrc adjust someone's tax code on the assumption of rental profits being the same but fail to take in to account losses carried forward which would wipe out any tax due.

On a few occasions now I've had clients codes changed based on last year's profit, even though they had plenty of losses b/fwd to reduce the tax to 0. And plenty c/fwd to do the same next year.

If there was any reasoning behind it I'd be more willing to accept it.

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By CazzyT
27th Sep 2018 09:17

The other problem that keeps occurring is that once the SATR has been submitted, HMRC "correct" it for underpaid tax included in the tax code - even though this was an estimate and they now have the actual figures on the return. Reasonably easy to sort out if you get the right person on the phone but a another round of frustration and wasted time nonetheless.

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to CazzyT
28th Sep 2018 12:22

I too have had clients receive "amended" computations issued by HMRC to include the tax they might owe for the year - you really couldn't make it up - especially as in each case the client was actually overpaid for the year.

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27th Sep 2018 09:42

Please don't come back next year asking for advice on how to negotiate time to pay arrangements for these clients who, having deferred their tax liability, find themselves without the funds to meet it, and think HMRC is being like totally unreasonable...

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to WhichTyler
27th Sep 2018 11:04

WhichTyler wrote:

Please don't come back next year asking for advice on how to negotiate time to pay arrangements for these clients who, having deferred their tax liability, find themselves without the funds to meet it, and think HMRC is being like totally unreasonable...

If I do ever need advice on that I'll be sure not to ask you...

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By mbee1
to WhichTyler
27th Sep 2018 13:12

WhichTyler wrote:

Please don't come back next year asking for advice on how to negotiate time to pay arrangements for these clients who, having deferred their tax liability, find themselves without the funds to meet it, and think HMRC is being like totally unreasonable...

Perhaps a closet HMRC employee.

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28th Sep 2018 00:08

Deja vu !! - when self assessment was invented potential underpayments caused real problems and legislation was passed excluding SA taxpayers from this aspect of PAYE.
Has that now been revoked?

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28th Sep 2018 10:18

Whilst I don't usually experience problems getting estimated income etc removed from codes. As I practice I have instigated the standard as ticking the box on page TR6 to say "do not collect any unpaid tax that is likely in 2018/19 via tax code adjustment in 2018/19".
There are obviously some clients who prefer to pay through the year and for those we untick the box, once it has been discussed with them.

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By Moo
to Stargazer42
03rd Oct 2018 11:06

I think you are referring to Box 3 on TR6 but that is not the actual wording on the paper return and is not a catch all. It comes with restrictions which are listed on the tax return guidance notes page TRG13. In particular state pension is apparently excluded from the income where you can opt to pay through self assessment rather than have the tax coded out and there is also an overall limit of £10,000 income. Whether these restrictions are statutory or just HMRC making the rules up I will leave for those more nerdy to comment on.
The problem I have with my own tax is that following submitting my 2017/18 return they have sent me a punishing 2018/19 K code but I also have substantial POAs due for 2018/19 based on my 2017/18 liability so they are effectively trying to take the same tax twice. OK, it will come out in the wash once my 2018/19 return goes in or I can apply to decrease the POAs but those options both carry penalties - loss of use of my money for a year or risk of reducing POAs too far and suffering interest.
I'm think I will give HMRC a call and tell them what I think of their thieving ways and ask for a copy of their calculation of the anticipated 2018/19 underpayment so that I can check it, there must surely be a calculation? I mean they won't just be making these figures up? Right?

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By birdman
29th Sep 2018 22:20

Worst case I've got is a chap with a pension plus a fluctuating salary which, when annualised, takes him into HR tax some months but not others, so pretty much every month there's a new coding. Spent a lot of time last year sorting this out. Delighted to discover, on preparing his Tax Return, that employer had ignored and used 1150L throughout! Client rather less pleased with outcome....

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