"Underpaid tax for earlier years included in code"

"Underpaid tax for earlier years included in code"

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Once oor twice a year I get the following adjustment to my tax calculation:

"Underpaid tax for earlier years included in code (Tax Calculation box 7) has been changed to £xx.xx because the figure on the tax return does not agree with our records."

I've never been informed by this earlier either as an employer's agent or taxpayer's agent and the taxpayer has not been informed of it.

How can I avoid this other than checking any tax codes just before I finalise a tax return?

Replies (12)

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Scooby
By gainsborough
03rd Feb 2021 15:42

You could tick the boxes on page TR6 of the tax return, which should stop this happening for future years but I usually check the tax codes for that year and the following when preparing the return anyway to make sure all is in order.

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Replying to gainsborough:
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By Paul Crowley
03rd Feb 2021 16:14

Same here
HMRC regularly amend returns for fictional estimated underpayments

Needs a human at HMRC to fix them

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By Matrix
03rd Feb 2021 16:21

The underpaid tax is included under “Information to help complete your tax return” in the online account. We check this for every client for pension, class 2 NI, underpaid tax etc. I thought all agents did this.

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Replying to Matrix:
By petersaxton
03rd Feb 2021 17:09

Never knew that part existed. I checked it for the latest client and the amount does actually appear there. Unfortunately, when I checked the payroll there was just the code for the full personal allowance. If HMRC were doing what they said I would have expected the code to be lower.
I'll check this in future. I wish HMRC would inform agents when they change something.

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Replying to petersaxton:
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By Matrix
03rd Feb 2021 17:34

This section isn’t new.

A revised code must have been issued if the tax has been collected.

I find that you don’t always have access to all coding notices so I would never check historic ones when preparing a tax return, what’s the point.

Pension - not always there but quite useful when clients don’t have it.

Class 2 - loads of threads on this, some taxpayers not transferred correctly from DD method to SA, some have never registered using CWF1, others HMRC have mysteriously removed the class 2. You know in advance that there will be an issue if it says zero and it shouldn’t.

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Replying to Matrix:
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By Southwestbeancounter
04th Feb 2021 16:00

We always do this and now also check the API per our Sage Taxation and Taxfiler software too (we use both for different purposes) - usually the software providers have far more information but do not show the State Pension received - which is often the only bit that the HMRC link is useful for!

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By Jane Wanless
03rd Feb 2021 16:28

Does the underpayment match any underpayment on the 2018 return? If so, it should match the "information to help complete your tax return" section of the online account.

I've seen cases where the underpayment has been paid through PAYE, but a separate P800 has been issued by a PAYE team, and the resulting underpayment has found its way across to the SA system. Do check in case this has happened.

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Replying to janewanless:
By petersaxton
03rd Feb 2021 17:20

Yes it did appear in 2017-2018!
Somebody above recommended looking at the Information section. I wonder when it gets updated? I assume you can't go through all your clients on 6th April and see what is relevant. I looked at one client and it said his state pension is 0.00 although he is 80 and gets around £8,000 a year.

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By petersaxton
03rd Feb 2021 17:24

I have another client who HMRC sent a revised tax calculation due to me saying he had to pay class 2 NIC. HMRC say it should be 0.00. They say it's due to information they have on file. There's no information about it in the Information section. He's only 56. His sole trade profits were £17k. He's not in one of the exempt trades. I gave up phoning HMRC after 30 minutes on hold.

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Replying to petersaxton:
RLI
By lionofludesch
03rd Feb 2021 17:30

petersaxton wrote:

I have another client who HMRC sent a revised tax calculation due to me saying he had to pay class 2 NIC. HMRC say it should be 0.00. They say it's due to information they have on file. There's no information about it in the Information section. He's only 56. His sole trade profits were £17k. He's not in one of the exempt trades. I gave up phoning HMRC after 30 minutes on hold.

They'll have lost his CWF 1 - or it's disappeared from their records.

I haven't had one of these for ages but it was rife when the monthly direct debits were abolished in 2015. Or, rather, the following year - first under the new system.

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By Wanderer
03rd Feb 2021 19:09

Surprised you are finding this an issue. We get them all the time. As has been mentioned this often appears in the information section, often appears in a tax code, and almost always appears within the online accounts for the year but one before the year you are preparing. (Yes I know each of these has the occasional wobble).

We mark it up when, for example we have finished and checked the treatment of say the 2017/2018 liability and collection. "£xxx.xx from 2017/2018 carried forward to 2019/2020 PAYE code". Then carry forward to next year's schedule then wash it out in 2019/2020. Not infallible, as HMRC still make mistakes, but we are never find out about it after the event and have already included it in the 2019/2020 calculations and the advice to the client.

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Replying to Wanderer:
By petersaxton
04th Feb 2021 09:59

I'll check the Information online before I finalise my tax returns from now on.

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