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PAYE error backlog: Fasten your seatbelts

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6th Sep 2010
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HMRC's new PAYE system is now tackling previously neglected end of year runs, with P800 notices due to be issued soon – so why are tax professionals nervous? Simon Sweetman explains.

HMRC has launched its new PAYE system on the Herculean task of doing those PAYE end of year runs that it has not been possible to do before because there was nobody left in HMRC to do them. It was never the most popular task - those who remember concards will know what I mean.

The computer will have started on the last two years (2009-10 and 2008-9) over the last weekend, and the P800s will start to come out this week, with the first ones expected to hit the doormats today (although it may take some of them a long time to arrive). This should be good news, so why does it fill me with dread?

According to the Daily Telegraph, there are going to be up to 4.3 million repayments due and - much more worryingly - 1.4 million have underpaid, some of them by substantial amounts; and that's just from the first two years. The end of year runs for earlier years will follow on later, which shows what a state things have got into.

Secondly, this system has already had problems – many will remember the terrifying numbers of inaccurate and nonsensical coding notices it issued when it was first launched. Again, this was all part of the system clearing out old rubbish.

Another issue that could rear its head this time is that HMRC has been ordered to make even more cuts, and so will not be sending copies of form P800 to agents. The customer copy will include a paragraph suggesting that taxpayers 'show this to your agent or adviser', but will not specifically say that the adviser has not been told.

There is also a risk that this will create a perfect opportunity for those who produce fake repayment notifications in the hope of obtaining bank account details – particularly if agents are not involved. HMRC will need to say very loudly indeed that it does not use email for this.

This will also clog up HMRC's already overstretched phone lines like never before; being suddenly told that you owe a quite substantial sum in tax is going to concentrate minds. Then there is the question of how many of these underpayments have arisen because HMRC has not used information it has been given, and where people will need to claim that in the circumstances the tax should not be recoverable.

Most of all, it's a worry because of the recent history of things going horribly wrong when HMRC pushes the button on a new computer system - so fasten your seatbelts - it's going to be a bumpy ride.
 

Further reading
More coverage on the PAYE coding error crisis is available on AccountingWEB.co.uk, including:
Audit report uncovers PAYE coding fiasco
Phishers jump on PAYE bandwagon
Editor's blog: HMRC crisis - I feel your pain

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By Michele Shapland
06th Sep 2010 14:52

PAYE HMRC errors

I think that the majority of the people who will be affected by this will be the ones who :-

1. are not represented? As if there were the adviser should have checked the PAYE notice of coding to ensure it was correct and if not would have taken the necessary steps to get it amended. I certainly did.

2. Who do not prepared self-assessment tax returns? For those who do any underpayment would be indentified when the return is prepared.

I can imagine that the citizens advice bureau and other free advice centres like tax aid might get overwhelm but taxpayers receiving these unexpected demands.

Should the tax profession step in and offer a one half hour consultation to those concerns taxpayers? In my experience this can lead to referrals and fees which more than make up for the time given free of charge. I would be happy to do this if given the opportunity.

While this is another area where HMRC has let the tax payers down, lets be pro-active and try to resolve this rather than shout and achieve nothing...

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By cymraeg_draig
06th Sep 2010 18:28

Act AND shout.

 

We intend to take on these cases pro bono as we anticipate 90% of them will be fairly simple cases of "official error". So long as taxpayers have taken all reasonable steps to notify HMRC of any changes then I can see no excuse for HMRC not agreeing that it constitiutes "official error". 

I also believe that we should shout about this. We should shout at the politicians until they get a grip of HMRC and make it fit for purpose, and, we should shout through any media we can. The more the newspapers, the professional institutes, and sites like this, shout about their shortcomings, the sooner the politicians are likely to do something about it.  I know for a fact that at least 2 members of the current government do read this forum regularly. 

  

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By Normade
07th Sep 2010 11:29

HMRC's Debt Office
Have you seen one of the letters sent out by this office? They almost imply that you have defrauded the public services and they threaten recovery action and legal proceedings. Worse still, there is no mention of the possibility that the demand is inaccurate (which it is in my client's case - HMRC owe him £10k!) Also no agent's copy of course - just sent directly to the client.

I phoned them only to be told that they cannot stop these letters being sent out no matter what you tell them. They gave me the number of a processing office which turned out to be not a processing office - the person there was rude as well as unhelpful.

I am writing to complain although it may not achieve anything - at least it will make me feel a bit better!

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By cymraeg_draig
10th Sep 2010 09:39

Normade

s40 Administration of Justice Act 1970

Making threats intended to cause distress to the recipient when collecting a debt is a criminal offence.   

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By weaversmiths
13th Sep 2010 17:43

Madhouse

I had a letter copied to me sent to one of my clients who is a self employed plasterer and a filmwork deep sea diver (when he can get the work)  saying that on examination of his last Return he does not need to send in anymore Returns.  He has had no PAYE work whatsoever in the 6 or so years I have been acting.  Where are these people coming from??  He realised  the letter was wrongly sent to him - perhaps he should join HMRC, he certainly appears to have more savvy than they for such things.  As his Return had been so 'closely examined' perhaps I could put any old tosh on them and not bother with calculations etc?

In my Inland Revenue staffing experience (longish) it was the opposite of (in the real world as we used to say) "last in first out" to save redundancy payments.  Long term officers who knew their way around the Tax Legislation over many years were offered early retirement  so that inexperienced younger people stayed on (especially if they were female as females tend to have short service because of children etc as opposed to males who tended to make a career of the Revenue and therefore earned larger pensions - got that in confidence from someone quite high up the chain).  These old war horses certainly knew what they were doing, whereas the younger element quite often realised that once they had passed their year's probationary period and became established they could hang up their pens and coast.  It was a nightmare to managers and possibly still is. Methinks there are a lot of coasters out there?

 

 

The Ancient One

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