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PAYE Tax Codes: HMRC Proposes to Give Itself a Breather – at Taxpayer’s Expense… Print E-mail
Personal Taxes
Written by Lee Sharpe   
Friday, 11 July 2014 00:00

“Put yourself in the taxpayer’s shoes”, Adjudicator tells HMRC. Now, how do you feel if HMRC cuts your tax code and takes 30 days to tell you..?

Well, it never rains but it pours. Yesterday we were busy with the Adjudicator’s report but we did not overlook something that HMRC published a couple of days ago, innocuously entitled: “Maintaining Customer Service Levels in Peak Periods – Draft Legislation”

At this stage, you might suppose that this was about HMRC raising its game to ensure that the taxpayer was provided with an adequate level of service – which would be most welcome. Unfortunately, you’d be wrong. This draft legislation is not about maintaining (acceptable) service levels at all, but rather reducing the standard to a level which HMRC thinks it might be able to cope with.

Coding Notices are one of the key ingredients of PAYE: it is HMRC telling the employer how much / what rate of tax to apply to an employee’s salary, or pensioner’s pension. It is the only warning a taxpayer gets that his or her take home pay is about to change.

HMRC proposes no longer to send an updated Coding Notice to the employee or pensioner, where HMRC thinks it will not affect the taxpayer’s net salary or pension. While this seems fairly tame, and to an extent understandable, the chances seem quite high that this will result in someone getting far less income than they expected, without any explanation. PAYE and RTI are hardly error-free.

Perhaps more worryingly, in terms of the number of taxpayers likely to be adversely affected, is the proposal that HMRC will send a revised tax code to the employer or pension provider, and give itself up to 30 days to tell the taxpayer. Bearing in mind that the employer will probably be advised electronically, but the taxpayer will be notified by 2nd class post via HMRC’s facilities – which are already notoriously slow – it seems quite likely that this will stretch the time to 40 days.

Which means that there could easily be two monthly salary payments, or 5 weekly wage payments, before the employee has some explanation as to why his or her take home pay has fallen through the floor.

Why HMRC thinks that this will reduce telephone enquiries is a mystery. Practically speaking, an employee concerned with a reduction in take home pay is likely to ask his or her employer first. Employers only receive the tax code itself, rather than the full explanation sent to an employee, so they will normally be unable to help, even if they want to, or have the time.

If the change in code results in only a small change in take-home pay, then perhaps it will be acceptable to an employee to wait 30-40 days. But if the change means the employee cannot pay his or her mortgage, then they might not be able to wait that long.

While HMRC may say that it will all come out in the wash at the end of the year, this is no consolation to someone who suddenly finds they cannot pay their rent.

While the explanatory memorandum emphasises this will not change an employee’s “right of appeal” against a tax code, HMRC seems incapable of grasping that the damage will already have been done. Given that PAYE regime allows HMRC to delve into a taxpayer’s pocket using estimated figures and on a provisional basis, it is clearly essential that a taxpayer be allowed the earliest available opportunity to dispute HMRC’s calculations.

But this draft legislation aims to do away with this perceived inconvenience for HMRC, so that it can say that it is meeting new, lower standards. Would it have been beyond their wit to ensure that they gave themselves that extra time only when it meant that they code was increased, so that it only applied when the taxpayer would end up better off..?

The Adjudicator’s Office 2014 Annual Report Published Print E-mail
Personal Taxes
Written by HM Revenue & Customs   
Thursday, 10 July 2014 00:00

Judy Clements OBE, The Adjudicator for complaints about HM Revenue & Customs (HMRC), the Valuation Office Agency (VOA) and The Insolvency Service (The IS), publishes her 2013-14 Annual Report today. This is the 21st report since the formation of the office in May 1993.               

Judy Clements writes “I am very pleased to present my Annual Report for the year 1 April 2013 to 31 March 2014.  This is the sixth report I have presented about our work, and the 21st in the history of the Adjudicator’s Office.”

2013-14 was a very demanding and busy year for The Adjudicator and her office.

She goes on to say “This was the legacy from the exceptional workload received in 2012-13, from HM Revenue & Customs (HMRC) customers. In response we embarked on a Two-Year Recovery Plan that will take us through to March 2015.

My goal is always to provide the high standards of service our customers have the right to expect, and this has been at the heart of our work resulting in a new record in the 21 year history of the office for cases closed in a single year. We successfully resolved 2,350 complaints in the first year of our Recovery Plan.”  

A large number of the taxation cases reviewed related to PAYE and were considered under the provisions of HMRC’s Extra Statutory Concession A19 (ESC A19). The majority of Tax Credit complaints received by The Adjudicator are about HMRC’s refusal to write off overpayments.

The Adjudicator comments “The statistics from the work of my office are a stark reminder there is no place for complacency, particularly when this year 90% of HMRC customer complaints have been upheld…… We have successfully mediated 55% of cases received this year. I hope to see a significant reduction in mediated cases next year if all three departments continue to develop effective use of discretion and empower their front line staff to resolve issues at first point of contact, so customers feel the complaints process is timely and adds value.”

The Adjudicator has continued to build strong relationships with HMRC, the VOA and The IS and all have been receptive to her feedback for service improvement. The number of complaints referred to The Adjudicator by customers of the Valuation Office Agency and The Insolvency Service remained stable and total numbers were low.


1.    The Adjudicator’s Office was set up in 1993, to look into complaints about the Inland Revenue (including the Valuation Agency). HM Customs and Excise and the Contributions Agency joined in 1995. From April 2003 the office took on complaints about The Insolvency Service. In April 2005 the Inland Revenue and HM Customs and Excise merged to form HM Revenue & Customs (HMRC).

2.    Judy Clements OBE replaced the late Dame Barbara Mills DBE QC as Adjudicator in April 2009. She acts as an impartial referee when people are not satisfied with the way the departments have dealt with their complaint. She looks at complaints about handling issues, such as mistakes, delay, staff attitude, and quality of advice. She does not consider complaints about the law, or where an independent tribunal already exists for settling disagreements. Her recommendations are independent and her services are free to complainants.

3.    This report covers the period 1 April 2013 to 31 March 2014 and is available free of charge from the Adjudicator’s Office, PO Box 10280 Nottingham NG2 9PF. Telephone 0300 057 1111. It is also available electronically at

4.    Further information about the office (including leaflets on how to complain) can also be obtained from the above address or website.

5.    Statistics for the year to 31 March 2014 are below.

Statistics 2013-14(2012-13 in brackets)


HM Revenue

& Customs

Valuation Office Agency

The Insolvency Service


Complaints taken on for investigation

1087 (2574)

27 (23)

17 (15)

1131 (2612)

Investigation cases completed

2311 (1354)

23 (11)

16 (14)

2350 (1379)

Number upheld either partially or wholly


2073 (818)

5 (1)

6 (2)

2084 (821)


In 2013-14, The Adjudicator recommended HMRC pay a total of £246,094 in compensation to complainants for worry and distress and poor complaint handling (£81,309 in 2012-13). She also asked HMRC to reimburse £180,615 for direct costs (£207,108 in 2012-13).  The Adjudicator recommended that HMRC give up tax amounting to £1,899,780 (£210,138 in 2012-13) and that HMRC write off £2,042,769 in overpaid Tax Credits (£695,476 in 2012-13).

The Adjudicator recommended the VOA pay a total of £325 in compensation and £14,291 direct costs (previously no compensation or direct costs for 2012-13). The Adjudicator recommended The Insolvency Service pay £500 in compensation and £42,287 direct costs (£75 compensation and £1 direct costs in 2012-13). No recommendation was made for liability to be given up for either of these departments.

Adjudicator Upholds Record Number of Complaints about HMRC in 2013/14 Print E-mail
Personal Taxes
Written by Lee Sharpe   
Thursday, 10 July 2014 00:00

It seems TW’s not alone in being unhappy with HMRC at the moment: the Adjudicator has upheld 9 out of 10 complaints about HMRC in 2013/14.

HMRC has published a press release on the Adjudicator’s 2013/14 report – although it has not yet made it to HMRC’s website.

The report states that, in its busiest year ever for HMRC complaints, it has upheld 90% of them in favour of the taxpayer – up from 60% in the previous year. So, not only a record number of complaints dealt with, but a record number of complaints upheld. HMRC has also had to repay about £2million in tax - almost ten times the amount in 2012/13.

Unsurprisingly, the majority of cases were in relation to PAYE and Extra-Statutory Concession A19, whereby HMRC is supposed to give up tax when it fails to act on information it has received to collect tax in a timely fashion.

TW’s Mark McLaughlin had this to say:

“We at TaxationWeb – and numerous colleagues in the profession – have long been saying that HMRC has for several years been trying to marginalise claims under ESC A19.

It seems that this has come home to roost. The message from the Adjudicator’s Office seems quite clear: HMRC has – systematically, based on these numbers – wrongly applied ESC A19 to the detriment of taxpayers. It is extremely worrying to think that many thousands more honest taxpayers  will simply have accepted HMRC’s word, or had their claims turned down in the so-called “three tiers of refusal” which passed for its internal review procedure.

Reform is required – and not the “simplification” they tried to introduce a year or so ago, which was a thinly-veiled attempt to water down the rules in their favour.

Perhaps, most importantly, someone at HMRC needs to take responsibility and to say “sorry” for delivering such an astonishingly poor service to the taxpayer. While HMRC may try to argue that this is a very small percentage of the volume of cases it deals with, it is almost certainly a very small percentage of the many more people that have had their claims unfairly rejected. And let’s not forget, HMRC was supposed to apply this concession without having to be asked in the first place.”

No Tax Relief for McLaren Fine Print E-mail
Business Tax
Written by HM Revenue & Customs   
Wednesday, 18 June 2014 12:48

Formula 1 racing giant McLaren has lost its claim that a £32 million fine imposed against it by the sport’s governing body should be tax deductible.

McLaren took legal action after HM Revenue and Customs (HMRC) disagreed that it could deduct the finein computing its taxable profits.However, a tax tribunal has now supported HMRC’s view.

HMRC’s Director General of Business Tax, Jim Harra, welcomed the ruling:

“We’re very pleased the Upper Tribunal agrees that the fine should not be given tax relief, which supports our view that most fines are not allowable as deductions against trading income.

This case shows that we won’t hesitate to go to court to make sure the right tax is paid.”

The £32 million penalty was imposed on McLaren by the sport’s governing body, the Fédération Internationale de l'Automobile (FIA), in 2007 for breaching its International Sporting Code.  

A First-tier Tribunal ruled the penalty was tax deductible. However the Upper Tribunal has now supported HMRC’s appeal against that decision by ruling the penalty was not incurred wholly and exclusively for the purposes of McLaren’s trade and so was not an allowable deduction for tax.

Link to the Upper Tribunal’s Judgment is here, courtesy of HMRCLink

HMRC Secures Record £4.6m Minimum Wage Arrears for Underpaid Workers Print E-mail
Business Tax
Written by HM Revenue & Customs   
Friday, 06 June 2014 00:00

Over £4.6 million in wage arrears has been paid to more than 22,000 workers following a successful year for HM Revenue and Customs’ (HMRC) National Minimum Wage (NMW) enforcement teams.

New figures show that, in 2013/14, HMRC:

  • conducted 1,455 investigations
  • issued 652 financial penalties, worth £815,269
  • found arrears in 47 per cent of cases – the highest strike rate since the NMW was introduced
  • recovered average arrears of around £205 per worker.

Business Minister Jenny Willott said:

“Paying less than the minimum wage is illegal and, as HMRC’s record shows, if employers break the law they will face tough consequences.

We want to issue a clear warning to employers who fail to pay the minimum wage: under the Government’s new rules you will be named and shamed and face a stiff financial penalty.

If anyone suspects they are not being paid the wage they are legally entitled to, they should call the Pay and Work Rights Helpline.”

Examples of underpayment cases where HMRC has taken action in the past year include:

  • A Premier League football club which was ordered to pay arrears of over £27,500 to over 3,000 workers after it made deductions for uniforms and travelling time for staff working in hospitality.
  • A social care provider which was found to have not paid its staff for travelling time and other hours worked and was told to repay over £600,000 in arrears of wages to almost 3,000 workers.
  • A recruitment agency which was ordered to pay over £167,000 to workers, including some it had classified as unpaid interns.
  • A multi-outlet retailer, which required its employees to attend work before and after opening hours without pay, and which was ordered to repay almost £77,000 to more than 1,300 workers.

Jennie Granger, Director of Enforcement and Compliance at HMRC, said:

“Paying the National Minimum Wage is not a choice – it’s the law. HMRC will continue to ensure that workers get at least the wage to which they are legally entitled.

Where an employer ignores these rules, we will ensure that any arrears are paid out in full and the employer is fined. Rogue employers be warned – we will find you and you will pay.”

Further Points

  • The vast majority of National Minimum Wage cases are dealt with using civil penalty powers, as this route is usually the most appropriate and provides the most cost-effective resolution for taxpayers. However, in more severe cases, HMRC will take criminal action and seek a prosecution.
  • Anyone who believes they are not being paid the National Minimum Wage can call the Pay and Work Rights Helpline on 0800 917 2368.
  • Calls to the Helpline from interns who are working for nothing or for “expenses only” are being fast-tracked to HMRC enforcement officers for investigation.
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