Plan to delay issuing of tax codes will leave employees in the dark

The Association of Taxation Technicians (ATT) has voiced concern1 over a proposal by HM Revenue & Customs (HMRC) to relax the timeframe in which a revised PAYE code must be issued to employees. The Association believes the proposal is unnecessary, will have an adverse impact on employees, pensioners with PAYE income and employers, leading to greater bureaucracy and confusion.

Currently, HMRC should issue a PAYE code to an employee on or before issuing it to their employer. HMRC have published a draft statutory instrument proposing a contentious change to the 2003 PAYE Regulations. This would allow a delay in the issue of the employee’s coding notice by up to 30 days after the code has been notified to their employer.

Natalie Miller, President of the ATT, commented:

“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 very likely to lead to payroll bureaus 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 the employees will continue to be left in the dark until HMRC send 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, who already have significant responsibilities to deal with fulfilling their PAYE and RTI obligations. It makes far greater sense to treat employees like adults, inform them immediately of tax code changes and transfer the onus onto them to lodge any challenges or queries regarding correct codes and under or over-payments with the Revenue (as they do under the present regulations). In any case, only an employee can question whether a tax code is correct so it is far more logical to continue the existing process than to apply codes that may be incorrect in the proposed opaque and arbitrary fashion. 

“The ATT is also concerned that the proposal is wholly out of line with work that is being done elsewhere to address the problem of tax underpayments that are caused by incorrect coding. In our response, we have referred to the Underpayments Assurance Group, a collaboration between HMRC and external stakeholders including the ATT. The group works on improving the process of dealing with in-year and end of year tax reconciliations, ESC A19 cases and cases of employer error. We believe that this proposal could potentially undermine the work of this group and we urge HMRC to fundamentally reconsider its proposal.”



Notes for editors

1.       The Association of Taxation Technicians have expressed their concerns in writing to HM Revenue & Customers. The Association’s response can be read in full, here. The draft legislation proposing the amendment can be read in full here and the explanatory memorandum, here.

2.       Association of Taxation Technicians

The Association is a charity and the leading professional body for those providing UK tax compliance services. Our primary charitable objective is to promote education and the study of tax administration and practice. One of our key aims is to provide an appropriate qualification for individuals who undertake tax compliance work. Drawing on our members' practical experience and knowledge, we contribute to consultations on the development of the UK tax system and seek to ensure that, for the general public, it is workable and as fair as possible. Our members are qualified by examination and practical experience. They commit to the highest standards of professional conduct and ensure that their tax knowledge is constantly kept up to date. Members may be found in private practice, commerce and industry, government and academia.

The Association has over 7,500 members and Fellows together with over 5,000 students. Members and Fellows use the practising title of 'Taxation Technician' or ‘Taxation Technician (Fellow)’ and the designatory letters 'ATT' and 'ATT (Fellow)' respectively.