PAYE tax code changes could adversely impact employers


HM Revenue and Customs’ (HMRC) pay-as-you-earn (PAYE) tax code regulations could have an adverse impact on employers and employees, according to the Association of Taxation Technicians (ATT).

The professional body has expressed its concerns in writing to HM Revenue and Customs (HMRC).

It stated that HMRC’s proposal to relax the timeframe in which a revised PAYE code must be issued to employees could have an adverse impact on employees, pensioners with PAYE income and employers.

Currently, when HMRC changes an employee’s tax code in order to collect the right amount of tax directly from pay, it has to tell the employee at the same time as it notifies the employer.

HMRC is seeking powers that will enable it to delay this by up to 30 days.

Natalie Miller, president of the ATT, said: “The introduction of a delay of up to 30 days will inevitably lead to many payrolls being run using amended coding notices before employees have had the chance to check that they are correct.

“This seems wholly illogical to us, and is very likely to lead to payroll organisations and employers having to deal with more enquiries and complaints from employees and pensioners who cannot understand why there is a change in their net pay.

“Employers, however, are never given a breakdown of the coding changes, so employees will continue to be left in the dark until HMRC sends them those details, up to a month later.

“We take issue with HMRC’s rationale that this is about flexibility, specifically that delaying advice to taxpayers about changes to their tax codes will improve its service, especially during busy periods, such as self-assessment or tax-credits renewals.

“Rather, such an approach will immediately push the burden of telephone queries onto employers, which already have significant responsibilities to deal with fulfilling their PAYE and [real-time information] obligations.”

A spokesperson from HMRC said: “For the majority of our customers, PAYE deducts the right tax at the right time, so the significant majority of customers who pay their tax through PAYE will be unaffected by this proposed change.

”HMRC is proposing not to issue tax codes to customers who have no liability to pay tax or where their tax position remains unaffected.

“This is because our customers have told us issuing coding notices is of little value to them and causes them unnecessary worry. It will also save the taxpayer millions of pounds and will mean HMRC concentrates on dealing with customers who need our help.”