HMRC’s one to many letters to tackle P11D and P14 discrepanciesby
HMRC has issued letters using their one to many (OTM) approach to combat discrepancies between P14s and/or the P11D, with workers' self assessment declarations for 2019/20.
The latest round of letters sent to taxpayers and agents aims to encourage them to investigate potential discrepancies and to work with HMRC to resolve those issues.
HMRC’s one to many (OTM) letters
The OTM letters are not an official compliance check or a notice of investigation. Where a letter is received it is advised that the individual or agent checks the figures provided to HMRC for discrepancies and makes steps to correct them. The letter will detail the steps required to achieve this.
This project is a joint effort of the wealthy external forum, the agent compliance team (ACT) and campaigns and projects (C&P). C&P will be contacting individuals where a difference in reporting has been identified. ACT will be targeting agents dealing with large numbers of individuals, to discuss all their clients at once.
Agents, where this is the case, will want to complete investigations promptly and engage with HMRC to reach a beneficial outcome. With large numbers of a single agent’s clients showing discrepancies, it may indicate systemic issues that HMRC will be keen to investigate further. The draft letter from HMRC’s ACT stresses the importance of the professional conduct in relation to taxation (PCRT).
An individual where the self assessment is believed to be correct after investigation would be advised to contact the payroll department(s) of the employer(s) they have worked for. This may identify discrepancies that can be resolved for future years.
If after all investigations are completed, and the conclusion is no amendments are required, contact with HMRC would be beneficial to ensure no investigations are escalated from their end. Where more time is required, contact can be made with HMRC to be granted an additional three months for investigation and appeal. The reasonable excuse for not meeting tax obligation criteria have also been expanded to allow for coronavirus related reasons.
When to expect the letters and why has it taken so long?
HMRC allows a reasonable amount of time before issuing OTM letters in case employers or taxpayers identify and submit any amendments through their own investigations.
The wealthy external forum briefing gives the below dates for these letters to be sent. Some letters will therefore have already been received; however, these dates may be subject to change.
“Agent Compliance Team will contact agents between July and September 2021, but expect the majority of agents dealing with Wealthy customers to be contacted late August. It is expected that C&P will issue letters during September to October 2021.”
This OTM correspondence is the latest in a string that HMRC has issued, including deemed domicile declarations and omitted capital gains on a second home.
This may cause frustration with individuals where they find that no errors have occurred, but with the onus of investigation still being placed on them and their agents.
The P14 is a year-end report of the pay and tax received by an individual, which is sent to HMRC by an employer. The form was replaced by the year-end Full Payment Submission (FPS) and Employer Payment Summary (EPS) with the introduction of Real Time Information (RTI).
P11D forms are used to declare any taxable benefits in kind funded by the employer, such as company cars and medical cover. This does not need to be completed where no taxable expenses or payment of benefits are to be returned for an individual, or if all expenses and benefits have been taxed through the payroll.
Individuals who meet the criteria must submit a self assessment tax return where they detail all their pay, benefits, and other income to HMRC for review. Any shortfall in tax paid must then be paid based on HMRC’s assessment.
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With a background in accounting and delivering outsourced payroll to the NHS, Mathew is now a member of the CIPP Policy and Research Team. He strives to educate and represent the payroll industry and raise its profile in the business world.