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HMRC calculating PAYE underpayments incorrectly?

Does the new HMRC method of dealing with in-year underpayments have a in-built calculation flaw?

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Has anyone had any new tax codes, since the new PAYE Refresh dynamic tax code system started on July 2nd, that have included an in-year underpayment?

Have you checked the actual underpayment amount, as I have come across a very strange issue with the HMRC method of calculation:

An employer made a mistake on an employee’s payslip, which resulted in them sending an incorrect FPS. The employee had paid the correct tax but the FPS understated the amount by £1,847.20. HMRC picked up on this immediately (it coincided with an update from a P11D). The actual underpayment at this point, including the effects of the P11D, came to £1,864.40. This is based on a tax code of 12,394 (1239T), gross pay £32,102.44, and tax £7,089.86 at tax month 4.

HMRC calculated the underpayment as £2,835.94. This appears to be calculated as at tax month 3, rather than 4. The payslip date was 14 July 2017.

The FPS has now been corrected by the employer and the underpayment at month 4 should be £17.20 but HMRC have calculated it as £988.74. This again seems to show HMRC using tax month 3 in the calculation, rather than 4. The FPS has a date of 13 August 2017 and states that it relates to period 4.

I have double checked these calculations using HMRC’s own PAYE Payslip Calculator and the tax amounts agree to the penny.

I do not know if this problem calculation is caused because the payroll is paid mid-month or whether all HMRC underpayment calculations are incorrect (scary thought!). I have a query in with HMRC at the moment, but wondered if anyone else has seen the same issue?

Replies (3)

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By K81
10th Aug 2017 13:19

just had extremely unhelpful conversation with HMRC about the new codes & a coded underpayment.
My director client has salary £9000 pa. There is now an underpayment of £132 in his tax code. exactly how this can arise on someone who will not earn enough to pay tax & how they expect to collect it is beyond me & the actual concept was beyond the agent helpline staff member who was not at all helpful.
Being referred to back office apparently.

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Replying to K81:
By catlady
10th Aug 2017 17:57

That is weird! Is it just paid as a 12th each month or are the payments 'lumpy'?

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Replying to catlady:
By K81
11th Aug 2017 08:53

Paid £750 pm.

rang back & spoke to someone else who told me that they have duplicate record & can I send P45. I told them no that is not correct & that they need to close the duplicate record. Reffered to back office apparently.

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