Six million people have underpaid or overpaid tax

nobby24

Seems unbelievable that this situation could arise but who are the type of people affected?

http://www.bbc.co.uk/news/uk-11186397

NiceGuyEddie_2

nobby24 wrote: »

but who are the type of people affected?

http://www.bbc.co.uk/news/uk-11186397

On the whole, the sort of people that don't take notice of their payslips.

There will of course be some people included in the 6m figure that noticed an error and contacted HMRC to resolve the issue, but I fear they're vastly outnumbered by those who either don't check their payslips at all or those who look at their tax code, realise they don't know what it means and then don't do anything to find out if they're on the correct codes.

PAYE codes are actually very simple to work out what they mean - why one is on that particular code is not always so simple ( ) but a staggering number of people don't appear to know what their code means - when people whinge about the amount of tax and NIC they have to pay (and I full include myself in that!) you'd have thought they'd spend a few minutes understanding the basics.

I'm tempted to PM a moderator/guide so that we can set up a sticky at the top of the page regarding 'Understanding PAYE codes' to set out the basics but not sure if other people agree there's a need for one?

Pennywise

The only surprise is that HMRC have taken so long to admit how bad the problem was. As an accountant, I've know for probably 2-3 years that the PAYE system was in total meltdown and the transfer over to the new system at the end of 2009 was the final nail in the coffin. In Jan/Feb this year, we received wrong PAYE coding notices for well over 75% of our clients who were taxed under PAYE - a simple "human" review by HMRC staff before sending each out would have saved them a lot of time and trouble afterwards, but as usual, their arrogance meant they just didn't see the scale of the problem and clearly hadn't properly tested their new system - they continued to send out wrong PAYE codes even when they were told of the serious problems - they should have called a halt and stopped the issue, but they didn't. Even before the new system, HMRC were years behind in doing the processing and checking of employers returns, P60s and P45's - something that they had previously been doing every year suddenly got kicked into the long grass. Because the 2007, 2008 and 2009 records hadn't been checked and cross-referenced properly for a lot of taxpayers, the new system brought in loads of errors and mis-matches which made the problem even worse. We had clients who suddenly found their tax code had been reallocated to jobs they left years ago, PAYE codes suddenly started being posted to old addresses, some clients even got some of their tax codes allocated to employers they'd never worked for and against other income, such as interest, property, etc that they never had. Not only did old data over-write new data, but it was obvious that in some cases, one person's tax record had been super-imposed onto someone else's - hence the unknown employers and non-existent "other" income - the merge had clearly gone spectacularly wrong. The next "big" disclosure will be that the NIC side of things is just as bad - people won't know that until they come to retire, but the NIC recording system is just as shambolic and has been for even longer than the tax side of things - people are going to hit retirement age and find that the records show they havn't worked long enough for full basic pension (when they have) and worse still, and harder to notice, will be that their earnings/contributions history for the state second pension (the old Serps) havn't been properly recorded either so their earnings related portion of their state pension won't be right either - but very few will know and it will be incredibly hard to prove - I'm telling absolutely everyone, all clients, family & friends etc to keep their payslips, P45s and P60s and never even think of destroying them, even after the standard six years, as they're the only proof you'll have that you worked and of your earnings and NIC contributions.

System

I know this isn't the discussion forum but I so agree with you Pennywise.

The problem with fixing this mess now is that taxes processing jobs have been moved from site to site so much and experienced staff have been lost. It's entirely possible now that staff who have practically no understanding of PAYE but who have spent a few hours doing computer training on the new PAYE computer system will be tasked to try and fix the problems.

Also the very people the government want the public to communicate with - telephone helplines and as a last resort enquiry centres - are the current focus of HMRC's costcutting. Staff are not being replaced when they leave and enquiry centres are having their opening days/hours reduced. I wonder how many processing staff are going to have to be moved to dealing with the inevitable rise in complaints HMRC are going to receive :sad:.

johnsmi

nobby24 wrote: »

Seems unbelievable that this situation could arise but who are the type of people affected?

http://www.bbc.co.uk/news/uk-11186397

Thanks for letting us know about this Just wondering if

1 If there is any tax shortfall over a 2 year period will they then go back further years to see if one underpaid tax?

and

2 If there is likely to be any penalty to pay?

thank you

jm

KiKi

For a completely different reason I have just had my tax re-assessed by HMRC from 2003-4. I was on PAYE with an organisation (25,000+ employees), but needed charity payments and bank interest re-assessed for the years I was a higher rate payer.

They sent their calculations (and a cheque) to me, and I've spent the day going through them. However, what it seems is that tax code which HMRC used in their workings out is not the same as that on my payslip, which is, on average £65 higher than the HMRC one each year. I think it might be to do with contracting out of SERPS because of the pension plan I had with the company.

Either way, I'm writing back to HMRC as they still owe me approx £104, but I'm wondering if actually my company had my tax code wrong this whole time.


I have to say, I consider myself pretty savvy, but although I understand the basics of tax codes, I have no idea why mine was higher than the standard personal allowance...! I am single, with no shares, cars or any other benefits in kind. Just a final salary pension (no more!) and contracted out from SERPS (as I was informed when I joined back in 1999!).

Very worrying for people, though, especially in the current climate. Luckily I have savings if I need to pay money back, but not everyone's in that position.

KiKi

glider3560

KiKi wrote: »

Very worrying for people, though, especially in the current climate. Luckily I have savings if I need to pay money back, but not everyone's in that position.

Repayments are typically made by adjusting someone's PAYE code for the current or next tax year, so the amount can be collected over one or two years. It is unusual for HMRC to demand an "on-the-spot" repayment from someone who is solely on PAYE.

KiKi

glider3560 wrote: »

Repayments are typically made by adjusting someone's PAYE code for the current or next tax year, so the amount can be collected over one or two years. It is unusual for HMRC to demand an "on-the-spot" repayment from someone who is solely on PAYE.

I wasn't thinking of a lump sum repayment, more that it will leave some people £100 a month out of pocket, and they might need savings to live on to make ends meet whilst it's being paid back. It's just not a good time for so many people - families in particular - at the moment. When I think of some of my friends and their financial position, they would struggle desperately without savings to use to cover the shortfall.

I think that when you're on PAYE - especially in a large, reputable company - it's very easy to assume that your company ensure your tax code is right and therefore would have no idea you're underpaying, especially if it's a small amount. I'm sure (hope!) people will start checking from now on. Bound to be some backlash somewhere on this. *sigh*

KiKi

kickwhamstunner

johnsmi wrote: »

Thanks for letting us know about this Just wondering if

1 If there is any tax shortfall over a 2 year period will they then go back further years to see if one underpaid tax?

and

2 If there is likely to be any penalty to pay?

thank you

jm

No on both counts. They'll only assess earlier years if you ask them to.

Rupert_Bear

If my tax code is correct for me then sureley I would not be affected by this latest development.

suso

johnsmi wrote: »

Thanks for letting us know about this Just wondering if

1 If there is any tax shortfall over a 2 year period will they then go back further years to see if one underpaid tax?

and

2 If there is likely to be any penalty to pay?

thank you

jm

at the end of each year, your PAYE account is assessed.

If there are documents missings , (eg P11d's, P60/P45/P14's) then your year is classed as being "open" and will be reviewed manually,

according to the national audit office report published earlier in the year, there are approximately 16 million tax years currently classed as being open. affecting some 13 million individuals. the estimated timescale for clearing these is 4 years.

If your year is classed as being open from more than 2 years ago then yes they will review it, if its classed as being settled then unless you ask for more information then they will not review it.

HMRC are proposing to write off collecting underpayments from PAYE from over 4 years ago, in preparation for the reduction in timescales announced a couple of budgets ago, (2008 i think) where from 2012 they will only review the last 4years tax rather than 6 years.

As regards penalties, no, there are no penalties connected with an individual PAYE payment, if the underpayment is large and cannot be collected through the tax code, they you will be given 30 days to pay or you will be put into self assesment, once in SA then penalties, interest do apply.