Enter Your E-mail

Following recent press coverage about PAYE ‘failures’, LITRG outlines what is really happening.
 

Recent reports

Once again the press have been having a go at HMRC about Pay As You Earn (PAYE) failures.

Whilst LITRG is not slow to criticise HMRC when appropriate, the group thinks that the public should be aware that the current reported “mess” (PAYE underpayments and overpayments) arises because HMRC have become more efficient rather than less so.

So what is happening?

HMRC are doing four things in particular this year, as they bring the tax affairs of the 40 million people within PAYE up to date using their new and better technology.

First - the good news (for those who might have paid too much)

HMRC are repaying taxes:

• back to the year 2003/04. This will take some time and will probably run throughout the rest of this year and 2012. Indeed, it would have been better had these refunds been processed much earlier, but at least taxpayers will get some interest added to the money owed to them.
• overpaid for the tax year 2010/11. This began in July and has largely been completed.

Second - the not-so-good news (for those who might not have paid enough)

HMRC are asking for additional tax where PAYE failed to collect the right amount:

• for the tax years 2007/08 to 2009/10. This exercise has generally now come to an end.
• for the tax year 2010/11. This exercise will commence around the beginning of next month. Included within it will be some 150,000 pensioners who have not had their state pension fully taxed. They will be given a more sympathetic approach by allowing collection of money owed over three years rather than the usual one. This exercise will need to be completed by Christmas, so that the coding notices for 2012/13 can be as accurate as possible.

This catch-up by HMRC, which appears to be on track as predicted, is welcome as HMRC must be ready for the next phase of PAYE improvement (called Real Time Information) which begins in earnest in 2013.

PAYE will never be an exact collection method for everybody, but bearing in mind the volumes of people dealt with, it does a pretty good job. The improvements in 2013 and beyond should take the accuracy levels to a new high.

Very good news – help will be at hand

As LITRG did last year (for the tax underpayments for 2007/08 to 2009/10), the group will again be providing comprehensive guidance on their website at the end of next week showing you how to defend yourself against underpayment requests for 2010/11, where appropriate. So, consider bookmarking the LITRG home page or sign up for their news releases, so that if you get “not-so-good news” from HMRC in November or December, you know where to find the right guidance.

The guidance will include suggested wording for letters that you can send to HMRC for the variety of circumstances that will apply for this particular year (2010/11).