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What is HMRC doing? HMRC installed a new computer system in the summer 2009. The aim is to improve the operation of Pay As You Earn (PAYE) by bringing all a taxpayer’s records together and making sure that allowances and tax rates are operated correctly across all employment or pension income sources. The new system is performing automated end of year tax reconciliations. Previously HMRC have undertaken the reconciliation manually. The automated reconciliations are for the tax years 2008/09 and 2009/10.

The reconciliation is between the tax calculated as due from an individual and the income tax actually received from the individual. Accordingly, the calculations will show overpayments as well as underpayments.

Will you have to pay more tax?

This will depend on your circumstances. As a director of a company you will have completed an income tax self assessment form for each of the affected tax years. You should therefore have paid the correct personal taxation due. If you are with an Umbrella Company then the reconciliation may affect you, especially if you have not completed a self assessment form and or you have changed employer a number of times during the period. If you are a sole trader this reconciliation is irrelevant to you as you are not subject to PAYE.

How will HMRC notify individuals of any under or over payments?

HMRC are currently sending out P800 forms in the post to individuals. The P800 details the calculation and reconciliation of any under or over payment. The P800 is not a tax demand. A payment request will be sent separately. Unfortunately HMRC will not communicate by email or telephone. Any demands you receive by email or telephone will be scams and should not be replied to. Delete the email immediately. Do not visit the website contained within the email or disclose any personal or payment information

What should you do if you receive a P800?

HMRC will not be issuing copies of the P800 tax calculation forms to agents, so it is important for you to let us know if you receive a P800 if you wish us to deal with the matter even if you have appointed us as your personal tax agent. It is vital to check the P800 – even if it shows an overpayment and a refund due. Be aware that HMRC may not have full or up-to-date information about other income or about available allowances or reliefs. If there are errors HMRC should be informed as soon as possible. Do not assume the calculations are correct.

How will HMRC collect any underpayment of tax?

HMRC will include underpayments of less than £2,000 in the 2011/12 tax code and collect the tax via PAYE. This will be done automatically. If you want to pay directly you must tell HMRC. HMRC will allow the repayment by coding alteration to cover a longer period, if the extra deductions will cause hardship. Underpayments of £2,000 or more must be paid directly. HMRC will write, separately from the P800, and ask for payment. Taxpayers can request time to pay if they cannot pay in one sum. 

If you think we can help do not hesitate to contact us.