Tax reconciliation errors affect ‘thousands’
HMRC has “stopped” issuing income tax repayments after a leaked email revealed that end of year tax reconciliations for thousands of taxpayers may have been calculated wrongly, the Telegraph reported this morning. An HMRC spokesman told AccountingWEB that the process is “continuing as normal”. But the email, now reproduced below, said that some large employers were involved “so several thousands of employees may be affected”.
Elaine Clark, who runs the tax practice CheapAccounting.co.uk, said she understood that repayments for 2013/14 had been halted. “This concerns me enormously given that RTI was meant to correct all evils, all payroll information would be up to date and everyone would be paying the right tax. How can we get reconciliation errors? There has to be something in the system,” she said.
Employers had invested time and effort in RTI and were putting good data into the system. “At what point does that go wrong?” She added: “HMRC needs to step up to the plate very, very quickly and find out what the problem is.”
The Telegraph reported that “HMRC said tens of thousands would ultimately be affected but admitted it currently had no idea about the scale of problem”.
It added that a spokesman for HMRC said the incorrect letters were not demands but merely tax summaries, and that “no one has been asked to hand a penny over in tax because of this”.
HMRC told AccountingWEB: “The majority of the errors have happened because an employer failed to make a final payment statement for the 2013/14 tax year meaning our records were incomplete despite reminders that these submissions had to be made. We are sorry this has happened and we will issue corrected calculations in the next few weeks.”
HMRC note to stakeholders
[Update at 13.45] HMRC has provided a copy of the note sent to stakeholders including employers, professional bodies and business groups. It is reproduced in full below.
"We are today emailing our stakeholders to explain that we are aware that a number of employees recently received a form 2013-14 P800 which was issued during our bulk 2013-14 End of Year reconciliation exercise.
"The 2013-14 P800 shows an incorrect overpayment or underpayment where the pay and tax shown on the P800 is incorrect and does not match that shown on their 2013-14 P60.
"The most common scenarios are where:
- An incorrect overpayment is created as the 2013-14 reconciliation is based upon the Full Payment Submission (FPS) up to month 11 although the employment continued all year.
- Where the year to date figures supplied are incorrect, for example where an employer reference changed in-year and the previous pay and tax is incorrectly included in the “year to date” (YTD) totals.
- We have received an “Earlier Year Update” (EYU) and this is yet to be processed to the account.
- There is a duplicate employment (often caused by differences in works numbers and other changes throughout the year)
"We are urgently investigating these cases and will look to resolve the matter in the next 6-8 weeks.
"We currently do not know the scale of the issue, but some large employers are involved, so several thousands of employees may be affected.
"We are very sorry that some customers will receive an incorrect 2013-14 P800 tax calculation.
"We are urgently investigating these cases and will look to resolve the matter and issue a revised P800 to the employee in the next 6-8 weeks.
"Employers and their agents should not send any 2013-14 EYUs unless requested by us. We are aware that there are still some 2013-14 EYUs which we have yet to process to the relevant account.
"If an employee asks about a 2013-14 P800 which they think is incorrect, they should advise them:
- Not to repay any underpayment shown on the P800
- Not to cash any payable order they may have received
- Employees will not be affected by the incorrect tax code as we will issue a revised P800 before Annual Coding."