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Timely notification of tax codes will not be delayed for now

January 26, 2015


HMRC has said that it will not delay the issue of tax codes to employees after they have been notified to employers.  As reported by in July, HMRC had planned to delay the issue of amended tax codes by up to thirty days after the code is notified to the employer, but following concerns registered in the consultation process the change to PAYE regulations will be “postponed pending further investigation”.  The measure, detailed in the draft Regulations and Explanatory memorandum published on the 4th of July 2014, is designed to help HMRC manage the impact of taxpayer enquiries by providing “a degree of flexibility and contingency that would help [HMRC] manage service levels and resources”. 

This proposed 30 day delay attracted most comment in the consultation responses, with many respondents concerned that the impact on employers had not been properly considered.  HMRC had stated in its Explanatory Memorandum on the proposed changes that the impact on employers was expected to be “negligible to nil”, but some respondents pointed out that employers may have to deal with increased enquiries on changed pay deductions from their employees, particularly those with large numbers of staff or many temporary workers. 

Another issue raised by respondents relating to the 30 day delay was that it removed the opportunity for employees to check their tax code and ascertain that it is correct before changes are made to their pay deductions.  If an incorrect code is issued to and used by an employer, this risks deductions being made to pay which could seriously affect an employee’s finances, leaving them unable to pay for other expenses. 

Concerns were also raised regarding the proposal to remove notice of coding entirely for those employees where there is no liability to tax or no change to tax.  These included the difficulty in predicting someone’s income over the year and the possibility of HMRC being unaware of non-PAYE income which could affect an individual’s tax code.  Respondents commenting on this change all said that it is “intrinsically wrong” for a taxpayer not to be notified of their tax code, and that this is “contrary to HMRC messages about employee responsibilities to ensure that tax codes were correct.”

Commenting on the decision not to go ahead with the 30 day delay, the Association of Taxation Technicians said that the decision was welcome and demonstrated a willingness on the part of HMRC to listen to feedback from representative bodies.  President Natalie Miller said that the 30 day delay was of particular concern to the ATT because of the burden it would be likely to place on employers and payroll bureaux.  Miller went on to say that changes to PAYE must be based on “the principle that it is always best to treat employees like adults; that is achieved by placing the onus on them to lodge queries with the Revenue regarding their tax codes.  Maintaining the current regulations does just that.”

The other proposed changes to the Regulations included for consultation will however be made as planned.  Where there is no liability to tax employees will not now receive a notice of coding.  The requirement to issue a paper copy of the coding notice to employees will also be removed and HMRC is now looking at how best to manage the issue of codes (and other communication) to employees digitally, as is currently used for employers and agents.  HMRC said that the measures allow them to provide “more consistent and better customer service overall”, and that they will continue to monitor feedback arising from these measures and will use this evidence to “support continued use of the delay of up to 30 days to manage customer demand and inform any future decision on the legislative change.”

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