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Action called for on tax code problems. Pearson May News Update - Monday 25 January
- HMRC issues penalties for late PAYE returns
- New agency worker rules could 'hamper' job creation
- Action called for on tax code problems
Action called for on tax code problems
More needs to be done to alert people to the risk that they may have been sent the wrong tax code.
The call came from the Chartered Institute of Taxation (CIOT) after worries emerged that a significant proportion of the 25 million tax coding notices that are being issued this year by HM Revenue and Customs (HMRC) may be incorrect.
The CIOT said that the figure is double the number sent out last year and that the wrong information could cost individual taxpayers hundreds of pounds.
That a proportion of the tax codes are incorrect is down to an error in the new PAYE system, the CIOT explained.
A number of people with one job are receiving two (or more) tax coding notices with different codes shown.
If the error is not dealt with by HMRC in the next few weeks, the CIOT continued, misleading information will be sent to huge numbers of employers and pension companies. As a result, incorrect amounts of tax will be deducted from employees and pensioners.
The CIOT wants HMRC to act to warn people of the possible problem.
Specifically, HMRC should issue a clear public statement of the extent of the problem and explain what they are doing to tackle it.
This should involve a major publicity campaign, adverts in the national media and a clear, easy to find message on the HMRC website detailing how people can check whether their tax code is correct.
The CIOT also urged HMRC to check the issue of P2 letters yet to go out or to add a note to each one explaining how to check the code and, if it is incorrect, whether HMRC needs to be contacted at once.
Employers and pension companies, too, should be told what to do if they receive tax code information for former employees or receive more than one code for a current employee or pensioner.
Andrew Hubbard, the CIOT’s president, said: “Most people on PAYE are used to assuming that what the taxman sends them is correct. Many file away coding notices without even bothering to check them.
“But this year, many of them are being given wrong information, and unless they spot it and tell HMRC, their employer will receive the wrong information too, and they could get a nasty shock when they open their April pay packet and see it is as much as a hundred pounds lighter than they are expecting.
“The government should launch an urgent publicity campaign to highlight what has happened and tell people what they can do about it. They also need to add a specific warning about it to the majority of P2 notices – the letters containing tax code information – which have still to go out.”
Mr Hubbard added: “The new PAYE system is potentially very good and this is really just a teething problem – but a serious one that HMRC need to warn taxpayers and their advisers about and help them resolve.”
P2 notices, which contain tax code information, are being sent out between the first week of January and the first week of March.
Consequently, taxpayers have only a limited amount of time in which to identify and point out any errors before employers are informed of their employees’ tax codes in P9 notices which are issued during March. The tax codes apply to the coming tax year of 2010/11.
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