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Notices of coding - what to do

1st Feb 2010
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The fall out started in January. Now is the time to check the advice from HMRC and decide a plan of attack. Keep calm and carry on seems to be the message!

UPDATE:  HMRC provided information about three scenarios where codes are incorrect and will do their best to contact affected taxpayers. Check out these situations on the HMRC website here.

HMRC has come under heavy criticism during the last two weeks from all sectors of the press in relation to the issue of the annual coding notices for PAYE. This starts in mid-January, and will run until mid-March, by which time employers will have been notified of the codes to use for their employees for 2010/11. The department issued advice about the coding run this year on 13 January - here on we posted a short 'heads up' message saying "don't panic" and left it for today, knowing that accountants had enough on their plates with tax returns.

Notwithstanding that agent representatives had received notice and advance warning of the issues this year the press worked up a storm which has risked distracting us in the final week of the busiest month of the year. There is ample time before April for taxpayers and their agents to resolve any issues and HMRC are working to ensure that codes are rectified during this period. This article summarises the current advice

Let's start with the advice delivered to agent representatives in January and see where we go from here. I will extract verbatim :

"Between now and March, HMRC will be sending PAYE Coding Notices to individuals telling them what their new tax codes will be for the tax year 2010/11.

Electronic notifications of changed codes to employers and pension providers are expected to start on 8 February, with paper versions scheduled to start on 22 February. The despatch of all such notifications is currently scheduled to complete in the week commencing 15 March."

"For the first time, NPS has created a single record of an individual's PAYE pay and tax details, allowing multiple sources to be linked and the tax deducted from all source shown together. The result will be improved accuracy.

One of the impacts of the move to NPS is that we expect more individuals than in the past to receive a Coding Notice for 2010/11 and future years. Reasons for this include:

  • where better quality data allows the system to adjust codes automatically and allocate allowances for customers who have more than one employment or pension;
  • where Age-related allowances and Higher-rate restrictions are applied more accurately as a result of automation;
  • where the personal allowances taper for those with incomes over £100,000 has been applied; and
  • where an agent is acting, we will now send a copy of each notice to the tax agent automatically, so agents will no longer have to request one

Additionally, in this first transitional year, we expect to issue more coding notices than will usually be the case. This is due to:

  • the automated matching of employee/pensioner pay and tax details contained in 2008/09 employer end of year summaries identifying previously unrecognised employments or pension sources;
  • the system creating new employment records where there has been a mis-match between the data held on our current system and the details supplied in the 2008/09 end of year summaries by employers and pension providers. The system may, therefore, generate more than one Coding Notice or an incorrect notice, where the system has set up another employment record for an existing employment."

 HMRC's advice then turns to how to deal with taxpayers who think that they may have incorrect notices of coding "... the following additional advice may help in deciding whether to contact HMRC:

  • A Coding Notice is issued for every separate employment or pension source where there is a change to the customer's code number;
  • If no change is appropriate, a coding notice will not normally be issued;
  • No-one should normally get more than one Coding Notice for each employment or pension source;
  • If there has been a data mismatch, customers may receive more than one Coding Notice for the same employment or pension source. These would normally be received on the same day or within a few days of one another, but in separate envelopes;
  • If more than one Coding Notice is received for the same source, it is possible that one (or more) of the codes is wrong." 

Here is what HMRC recommend as the course of action. "Taxpayers should: 

  • wait a few days after receiving the Coding Notice to check whether any more arrive;
  • check their code using the guidance on the flyer included with each code issued;
  • find more information about tax codes on the website;
  • use the website to update their name and address details;
  • telephone HMRC and speak to an adviser to tell us that the tax code is wrong or to update other details. Our contact centres are open 8am until 8pm Monday to Friday and 8am until 4pm on Saturdays. The lines will be very busy in January dealing with tax returns so you may want to advise those who can't get through to call us back in February; and
  • customers should also check that the code operated against their employment (s) and/or pension source(s) on their first payment date after 6 April 2010 agrees with their 2010/11 coding notice. If there is any discrepancy or doubt they should contact us."

Many of the worried taxpayers have been concerned about notices in relation to employments that have ceased, but agents should be able to reassure their clients on this score. A Notice issued in respect of an employment that has ceased has no meaning - the code will not affect the employee as it cannot be operated by their current employer. Agents will need to think about where the problems really lie with code notices, and spend time resolving the issues with live employments rather than dealing with ceased employments. It may well be frustrating for agents, but this is a necessary step to a much improved system.

UPDATE: See the message at the top of the page regarding additional information provided in February about when codes are likely to be incorrect. This includes when an employment has ceased some time ago and allowances are allocated to the ceased source. HMRC has provided information for taxpayers here.

Replies (21)

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By User deleted
01st Feb 2010 11:54

Take notice ! and ......

"A Notice issued in respect of an employment that has ceased has no meaning - the code will not affect the employee as it cannot be operated by their current employer. Agents will need to think about where the problems really lie with code notices, and spend time resolving the issues with live employments rather than dealing with ceased employments. It may well be frustrating for agents, but this is a necessary step to a much improved system."

Half right ! What about other coding notices that are devoid of the personal allowances that are allocated to the non employment ?

What about the effect on payments on account reductions made in good faith ?

What about large underpayments discovered at the end of the year, after the moneys been spent ?

HMRC expect the taxpayer to understand their tax code, (anyone tried an A19 recently) Yet the experts only get, by my estimation, about 10% right .

Frustrating ?? try bloody infuriating !!

Who is going to pay to sort out this muddle !

Code of practice 1 Claims ??

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Rebecca Benneyworth profile image
By Rebecca Benneyworth
01st Feb 2010 12:07

Yes but

You don't need to correct notices which relate to non employments. Only those for current employments. Yes, these may be wrong, but that's where we have to focus or we will run out of time. There's no pont ringing HMRC to delete a notice in relation to an old employment if the code for the current employment is correct - that was my point.

Notices of coding have been an annual debacle, and the new system will banish that forever after the transition - which I agree is trying but that's life. Next year we really will have cause to jump up and down if it isn't right.

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By aidan.sergent
01st Feb 2010 12:36

Am I just unlucky?

The notices of coding we have received so far for 2010/11 appear to be works of fiction. Employee with one employment has no personal allowances and moved to BR, employee with multiple employments, but remains a basic rate taxpayer now has three D0 notices of coding and again no allowances.

Of course, why should HMRC care? Who is going to sort out this mess - why us of course.

Are HMRC using 3 year olds to issue the new codes?

I have just had an unworthy thought. If all these incorrect notices of coding hit for the first time at the end of April payroll run, it is not going to do the Goverment many favours in a 6th May election is it?

Perhaps since there is a political angle to this, the Government might actually kick someone up the backside and get it changed from the source. What do readers think?


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By User deleted
01st Feb 2010 12:38

PAYE Codes issued to old employer

What about codes issued wrongly ONLY to the old employer and not to the new one?  In this instance you really do need to contact HMRC to get it changed.  I understand from press reports that errors in the system could affect large numbers of individuals who have changed job during this tax year.  I speak as one of those affected!

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By pat27
01st Feb 2010 17:13

Tax Codes

My own 2010/11 Tax Code shows a restriction for an underpayment. When I queried this (after holding for 20 minutes ) I was told this related to tax year 2006/07. A review of previous coding notices revealed this underpayment had been coded out 2008/09. Another phone call and another 20 minute wait and I was promised some would look at it and a revised code would be issued.   How many people with little or no knowledge of tax would know that this tax code was wrong and how many other people have  had underpayments incorrectly coded 2010/11.

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By User deleted
01st Feb 2010 17:35


Yes ! You were unlucky to become an accountant !

Think of all the useful things you could have done with your life !

Anyone embarking on a career in accountancy needs their head testing.

Notices of coding they are just wrong as usual.

Underpayments coded out should always be checked ! Quite often they are fictitious.


or is it just dark out there? lol

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By Peter Tucker
02nd Feb 2010 00:31

Rebecca's "Yes But " Comment

The Annual Coding process undertaken by HMRC would appear to have suffered this year because of the state of HMRC's PAYE computer systems and the way in which they have been amalgamated to create the new PAYE system, previously known as Modernisation of PAYE Processes for Customers.

The real problem would appear to be the completely unacceptable state of HMRC's computer records for Individuals within the PAYE system. This is illustrated by the huge numbers of Open cases - Indivduals for who no annual assessment of their Income Tax liability has been made, coupled with the millions - some 11.5 million for the year ending 5th April 2006 - of Forms P14 which HMRC have not been able to match to an Individuals PAYE Record.

There is also the rather concerning Case Study on the HMRC website which describes the attempt to match employees on a particular CMG Payroll with computer records held by HMRC. This shows that of a work force of 42,390 employees, only 79% of the work force were know by HMRC to be working for the particular employer. This means that HMRC's record showed that some 8,900 employees were working for some other employer. The case study suggests that this should be viewed in a positive light. Why ?

The introduction of mandatory filing of PAYE information requires HMRC to deal with the data provided as it is received and it would seem that this aspect of the PAYE process has not been undertaken. It would also seem that HMRC have failed completely to understand the implications combiening data from the different PAYE COP databases into their new PAYE system, particularly as the old databases held so much incorrect and inaccurate information. This was a serious and fundemental error.

Someone with HMRC senior management should take responsibility, other than not taking their bonuses?

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Rebecca Benneyworth profile image
By Rebecca Benneyworth
02nd Feb 2010 09:01

Thanks so much Peter

Peter, thanks very much for your contribution to the debate on this subject, as it is very useful to have more facts available form someone who clearly understands the position better than I.

I tend to tackle problems like this with a "positive spin" - that is probably down to my personality and the way I approach problem solving - I rarely look for who is to blame as when the stuff hits the fan the best solution is a pair of Marigolds and a bucket of hot water & disinfectant. In this situation I have been more concerned with getting on with dealing with the fall-out rather than apportioning blame.

But the information you have added does add a different dimension to this problem. As with a lot of problems that arise in the tax system we generally need to act quite swiftly to resolve them - and this is no exception - and the opportunity rarely presents itself for a "post mortem". But this is probably one of those - and of course we are talking about a post mortem for a very slow and painful death - the PAYE system has had one foot in the grave and the other on a banana skin for many years.

Does anyone else have any views about whether we do need to look at how this arose (and over a period of years) or are we going to have to just "get over it". My temptation, as I have said is to take that line - deal with it and move on - but maybe an enquiry is called for as to whether this (just running the codes and seeing what happens) was the right way to resolve the issues. It may prove to have been the most naive and crass failure to think through the issues (and your information is leading me to that suspicion) to date ! And we must acknowledge that there is some stiff competition there for that title.

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By User deleted
02nd Feb 2010 10:11

Culture change

It's not just HMRC that have these problems, the culture of a "can do attitude" has got out of hand, and decisions are about change are made far to quickly by senior management without listening to the technical problems that exist. If a problem exists denial seems to be the preferred approach. We need to understand that problems do not go away even if we hide them.

Do HMRC have any method in problem solving or is it all driven by political outbursts ! lets face it these chaps did not even understand pretty simple rules.

I think we all end up taking the practical route to solve the immediate problems but we also need to kick up a fuss otherwise nothing will change.

It could be worse the PAYE sytem is at least evolving, the CIS seems to recreate itself and gets worse each time with large parts of the country simply ignoring it. What is the answer "lets make some new rules" defies belief really.

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Rebecca Benneyworth profile image
By Rebecca Benneyworth
03rd Feb 2010 07:58

Please note all

HMRC has identified three situtations where the code notice is likely to be incorrect and will try to contact affected taxpayers to get these rectified. These are set out on the new page added to HMRC's website, for which a link is provided both at the very top of this page in the "Update" section, and in the body of the article. This does include when a code is issued for a "long dead" employment - as a consequence the code allocated to the current employment is likely to be incorrect. Taxpayers receiving BR or D0 codes for the first time for a source are also likely to have an incorrect code.


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By User deleted
03rd Feb 2010 11:14


Last week my company received 37 notices of coding......only 1 of these was correct!

Many years ago I was an inspector of taxes, we did a manual review  to prepare codings and rarely were any incorrect.Yes it took a long time....a rare opportunity for overtime... however now we have a situation where the work is having to be re-done and agents are inflicting fees upon their clients for dealing with the errors.

The tax offices are in a mess and the employees seem very disheartened , so yes the civil service masters need to take a long look at how they are functioning instead of shrugging their shoulders whilst they wait for a general election.

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By User deleted
03rd Feb 2010 11:48

return to sender

Just write incorrect ! please correct and return to the sender. follow up with a complaint and code of practice one claim. The old fashioned ways are coming back!

There is no point in using the telephone because HMRC do not answer most of the time and when they do, that matter will need to be referred to a tax specialist (hello ?) who will not return the call.


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By User deleted
04th Feb 2010 07:49

Are the errors deliberate?

Just a cynical thought. Have HMRC deliberately issued so many wrong to generate work for themselves to avoid being made redundant!

I don't know why for SA cases they can't just issue the basic personal allowance and deal with all the rest in the tax return.

Also, we have clients receiving codes for employers they have never worked at. Come on HMRC sort yourselves out.


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By User deleted
04th Feb 2010 14:47

PAYE codes

I can no longer find reference to code of practice one on HMRC website. Can someone direct me?

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By User deleted
04th Feb 2010 15:17


Cop 1 was withdrawn and replaced with a factsheet  'How to complain'  type this in search !

sorry still using old terminology.

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By nogammonsinanundoubledgame
04th Feb 2010 19:40

Quick question for Peter Tucker

or Rebecca, or anyone else with the answer ...

When the 0% NI rate band was introduced between the LEL and PET, the received wisdom was to ensure that you trigger a positive liability for those whose salaries were hovering around the PET limit, so as to ensure that some manual monkey would be forced to process the P14 and ensure that the system recognised that the year was NIC paid-up.  Otherwise it was feared that the P14 would simply not get processed.

That concern was largely of relevance to manual payrolls.  Following Carter and all that, we have for some years now been merrily filing online, and that particular concern took something of a back seat.

I don't fully understand Peter's comment that for 2005-06 there about 11.5 million unmatched P14s (presumably from manual payrolls?), but I would be interested to know whether their pension entitlement 20 years down the road is at risk of being compromised as a result.  Is this still a live concern?

With kind regards

Clint Westwood

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By User deleted
05th Feb 2010 11:51


In my day with the Revenue the DSS posted the P14s onto the computer.  Dont know who does it now.  When I came to retirement I asked for a forecast from Longbenton and was told I was only entitled to about 30% of a full state pension, despite having paid a "full stamp".  It would appear that only a "married woman's rate" had been credited and a lot of the records had been lost.  After a full on assault I sorted it, but most would not have the wherewithall to be able to.  Perhaps there is no point in actioning the P14s if there will be no pension for those working at the present time? Basically, of course,  their record is being compromised.

All the  Coding Notices I have received so far are for ex-clients from years back for whom I no longer act or current clients who have done a bunk. No worries there, then.

I rarely make telephone calls, it is cheaper for me to bang out a letter and far more expensive for the Revenue to answer. I have pointed this out on many an occasion.   I will change when they change. 

The Ancient One



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By User deleted
05th Feb 2010 13:06

I dare say many notices have been sent to the wrong address as we are still receiving some paye corespondence at our former office address (two years ago), despite updating our agent details. I can only assume that HMRC have several databases for PAYE matters. There is also some inconsistency as to whether we receive copies of clients notices of coding or not.

We have also noticed that following a claim to reduce (for the self employed) that the personal allowance will suddenly move from the main source of income to a long previous BR employment source. Not easy to spot when no notice of coding is received. Rendering the claim to reduce incorrect and resulting in interest charged !

Most of these errors in notices of coding seen to be in the revenues favour in terms of cash flow planning for HMRC. One can only assume therefore that these errors are not mistakes !

Am I still right in saying it is the taxpayers choice where the personal allowances used ?


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By pauljohnston
07th Feb 2010 19:08

why cant HMRC get it right occassionally

If HMRC were really trying to get it right why hasn't the official stood up and omitted that is is very poor output not just a few errors.

One of my clients became a widower 4 years ago.  The 2009-10 Tax Code has just been changed to include the Married Persons Allowance - I hope this has not upset him, it would me.  Like previous correspondants I am writing because a phone call is just a waste of time.

On another note how many "corrections" to the SA100 State Pension details have others received.  Having taken the data from the clients bank account we are advised that the Pension is £2000 less than received. So how do I persuade my client that he has to pay me to tell HMRC that they have screwd up and their promised refund is an underpayment.

Both of the errors are unforgiveable.  I feel that even if the HMRC will not pay us the appropriate office should be fined and have the money taken from its budget.  This may make them more responsible - however I guess places like Centre1 would probally end up with insufficient to pay its staff.  Now thats away forward for staff cuts.


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By Peter Tucker
08th Feb 2010 15:38

Unmatched Items

Clint and colleagues,

The 11.5 million Forms P14 refers to the number of Forms P14 recd. by HMRC from both automated and manual, large and small payroll systems, which HMRC were happy to accept on paper, magnetic tape or electronically, BUT which they were unable to match to a PAYE computer record. This means that the Individual paid their tax and NI but the amounts paid were not credited to the particular individual.

You may also be interested in the following extract from HMRC's 2008/2009 Accounts, which would seem to give even more cause for concern?

6.42 In some instances we receive end of year information from employers that includes National Insurance contributions information that cannot be matched to the relevant contributor records. We apply well established routines to trace these non-matching items and make all reasonable effort to update contributor records. Where the items still cannot be matched they are kept permanently on non-matched suspense files. These are maintained to ensure that when an individual queries the completeness of their contribution record we can retrieve unmatched items from suspense files and credit them to the individual’s contribution record.

6.43 Up to 2006-07 the suspense files contained approximately 116 million items. For the 2006-07 tax year some 2 million new items were added to the suspense files; this represents about 3.5 per cent of the year’s returns. We continue to undertake detailed analysis and work closely with key inter-Departmental stakeholders to develop strategies to improve the quality of the data submitted from employers.


So we appear to have a situation where HMRC has all the information supplied, under penalty, by Employers but which HMRC just is not able to credit to the proper Citizen. The fall back position is that if you think something is not correct, and there is a lull in the calls to the Contact Centres, HMRC will "sort things out", eventually. A lot of money has been spent in developing and maintaining this system !!

Non-Matching National Insurance Contribution Items

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By alansealey
12th Feb 2010 12:38

The interesting thing about computer software

is that the people that design it are often left in the lurch by the very people who should be helping them, because they actually understand what the system is meant to do. When the programmers design the system, they end up guessing what is needed.  Does HMRC do it all themselves following a project plan with a timeline that says go live even if you have not done the groundwork because the minister says JDI  (just do it).

Now I wonder if mere accountants are invited to understand and contribute to HMRC systems development and implementations? That would be real working together.

I disagree with Rebecca, because I think accountants will always be left to sort out the mess if we do not get involved at the ground floor of these IT projects...and there is plenty more to come in this information age. Do we sit and wait for the next mess, or get stuck in and help look at the issues?

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