HMRC Plan to Delay the Issue of Employee Tax Codes: HMRC Plan to Delay the Issue of Employee Tax Codes The Income Tax (Pay As You Earn) Regulations 2003 (the PAYE Regulations) govern the day-to-day workings of how the Income Tax system works via the PAYE system. For example, they talk about how a tax code is determined by HMRC and how this should be applied for the calculation of tax and how this works on a cumulative or non-cumulative basis. Draft Regulations entitled The Income Tax (Pay As You Earn) (Amendment No. X) Regulations 2014 make some important changes with regards to the issue of tax codes to employees that, inevitably, will impact employers. In the first instance, the format of the tax code ‘notice’ (the P2) has been clarified to confirm that HMRC regard an approved method of communicating this advice is ‘in writing, by an approved method of electronic communications or be telephone’. Secondly, the proposed amendment Regulations sets out the circumstances in which HMRC do not have to issue a coding notice to the employee (and presumably, issue a notice of coding to the employer). Currently, a notification of coding does not have to be issued to an employee where: * The code for the new tax year remains the same as the code for the previous tax year or * The change to the code is as a result of changes to Personal Allowances (i.e. that would be provided for in the annual uplift of suffixes) Under the new Regulations, a coding notice will not have to be issued in the following circumstances: * The code for the new tax year remains the same as the code for the previous tax year: * The change to the code is as a result of changes to: * Personal Allowances (i.e. that would be provided for in the annual uplift of suffixes) or * In the tax tables * The employee’s PAYE income is not subject to Income Tax * The employee themselves do not have a liability to Income Tax More importantly, Regulation 19 (3) of the existing PAYE Regulations indicates that HMRC must issue the employee’s tax code notification at the same time as the notification is issued to the employer. However, the draft 2014 Amendment Regulations says that HMRC do not need to issue the employee’s code at the same time but must issue it within 30 days of issuing it to the employer. Comment The definition change of the word ‘notice’ is nothing surprising and, simply, allows HMRC to regard electronic communication of a tax code as acceptable notification. This could be read as recognition that HMRC may consider electronic tax code notifications for employees in the future (just as employers get electronic notification of tax codes for many employees). I do not see anything too surprising or worrying about their changes to the circumstances in which HMRC will not issue a tax code notice. I suppose that this demonstrates HMRC’s confidence in their systems in that they know exactly who will not be paying tax – and, I suppose, this is admirable, though are they actually demonstrating that they know a taxpayers’ liability status at the moment?! However, the fact that HMRC may have the power to issue the P2 up to 30 days after the employer receives the P6 or P9 is a real concern. HMRC explain their reasoning as follows: ‘providing flexibility for the timing of the form P2 will ensure that HMRC can send the notices at times when it is best able to respond to enquiries from employees. However, to ensure that employees can check their tax position in a timely way, HMRC has limited this flexibility to a period not exceeding 30 days after the issue of the notice to the employer. This will not affect the employee’s right of appeal against the determination of their code’ Quite what they mean by sending out notices at a time when they are better able to respond to queries from employees confuses me. Wouldn’t emphasis on the timely and accurate issue of notifications have been a better objective for HMRC to be striving towards? They further say: ‘The changes affect only the issue of notices of coding to employees. It is envisaged that these amendments will have negligible to nil impact on employers’ We query the words ‘negligible to nil’. If the 2014 Amendment Regulations amend the original 2003 PAYE Regulations, doesn’t this give us the very real possibility of the employer amending the tax code on the payslip a long time in advance of the employee actually receiving the notification for themselves? The normal course of action would then be for the employee to query it with the employer – hardly a ‘negligible to nil’ administration burden to me. We strongly advise any similarly concerned employers, taxpayers or representative bodies to pose any questions or comments on these draft Regulations to [email protected] by 03 August 2014. Further Information * Legislation – The Income Tax (Pay As You Earn) Regulations 2003 * HMRC – The Income Tax (Pay As You Earn) Regulations Amendment 2014 (Draft legislation) * HMRC – The Income Tax (Pay As You Earn) Regulations Amendment 2014 (Explanatory Note) * HMRC – Draft Legislation for Comment Payroll news | Payroll questions | Employment Law advice from Payroll Help dlvr.it/6MCR3h
Posted on: Fri, 18 Jul 2014 09:17:45 +0000
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