PAYE codes missed out pensions

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HMRC was caught up in another weekend avalanche of bad publicity as a result of PAYE codes that negelected to include allowances for people who started to receive pension payments during the past year.

In what BBC Radio 4’s Moneybox described as HMRC’s “latest tax bungle”, the department failed to take account of the state pension when it sent out tax codes to people who first drew their pension this year. As a result, it will send demands for underpaid tax to nearly 150,000 pensioners.

The same mistake happened in the two previous tax years, but was only picked up as reconciliations were finally made within the new National insurance and PAYE Services (NPS) computer system. Many of those previously affected have had their underpayments waived as a result of extra statutory concessions, but because this mistake was discovered in-year, the department said it had no power to write the payments off.

Instead, affected taxpayers will be given three years in which to settle the outstanding sums.

CIOT tax policy director John Whiting told presenter Paul Lewis: “I think it’s the final knockings of the switch HMRC have done to their new computer system. And I say final. I hope it’s the final one.”

Whiting urged the department to offer the three-year payment option as a default and on Monday morning the deparment confirmed that this is the approach it would take.

A spokesman added: “We have included the state pension in the tax codes for 2011-12 which we issued recently. This means that they will be on the right footing for the future and paying the correct amount of tax from April 2011.”

Once all the end of year PAYE forms are received for 2010-11 (19 May), HMRC will then reconcile its records for the year and dispatch P800 tax calculations to pensioners who may have paid too much or too little tax during the year.

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About John Stokdyk

John Stokdyk is the global editor of AccountingWEB UK and


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30th Mar 2011 00:04

.How much longer and how many more fiascos before the numpties a


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31st Mar 2011 10:32

ESC on pension missed out of codes

Can anyone remind me, is it possible to use this extra statutory concession for 09/10, or is it only for years up to 08/09?

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31st Mar 2011 16:37

Re: PAYE codes missed out pensions

HMRC strikes again!

Last year (2010) I had a client who'd retired in January 2009 and filed his SA correctly himself for 2008/09 including what he'd received in pension. He then had a demand for SA tax that he did not owe. He asked me to check it out.

What had HMRC done? They'd included his pension income from January 09 to 6th April 09 correctly in his PAYE code, but then added a whole years worth of pension from April 08 to April 09 as well !

-- Witch-Queen

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31st Mar 2011 17:06


 And yet if we just so much as make a small error on a form etc. we face fines of £100s/£1000s/Spanish Inquisition

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01st Apr 2011 20:34

No more incompetents

Claiming using the PAYE code for new pensioners? Is that really likely to get the tax back?

We need to get rid of the management at HMRC and get in competent people.

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04th Apr 2011 14:50

PAYE codes missed out pensions

Whatever is this country coming to?  What a mess!  Instead of sticking their noses into other nations' business Cameron/Clegg need to get down to some serious action in the country that voted them in, the country that hoped they would throw a lifeline to after the last disasterous lot.  I have a client who has been sorely wronged by HMRC and who is writing to his MP - he lives in the North, is a senior in the medical profession and his wife a nurse - who is his MP??? Nick Clegg!   I sure hope he really rips into him, perhaps it might even carry some weight?  Dream  on .......


PS As a pensioner why am I not getting £1,000 extra in my coding like "normal" people?  This surely is discrimination. Think I will go to the Equalities Commission.  Become a one-woman pressure group!

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By Joss
09th Apr 2011 13:53

HMRC are trying to get the underpaid tax off employers

Just had an affected client on the phone about it. Employee started a pension. HMRC failed to deduct £1500 through coding. HMRC have sent my client (the employer) a bill for £1500 saying that it was his mistake - not collecting the correct tax (even though he operated all tax codes exactly as issued by HMRC in good faith). He phoned the employer helpline and they said they could not discuss it because it was the employee's affair not the employer's. And that he had to write to Birmingham to appeal against the "bill" he'd been sent. I have not yet seen the bill but assume they are trying to collect it as a penalty equal to the tax due pursuant to HMRC's own "error". Really this is the limit.

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