HMRC PAYE special interim update

Dear Customers and Stakeholders,

This is a special weekly update for you and, if appropriate, is for you to use with your respective membership and contacts. When sharing these updates with colleagues and networks, I would be very grateful if you would stress the context in which these are sent; namely as informal highlights as a result of listening to employer feedback and working in partnership with you.

I wanted to let you know that we expect to start the PAYE end of year reconciliation process for 2010-11 in the second half of July.

This reconciles customer accounts by checking the PAYE tax deducted against their taxable income. The majority of customer accounts will reconcile as balanced (typically more than 80%). But where too much or too little tax has been paid, usually because a customer’s circumstances have changed during the year, HMRC will send a tax calculation, on a form ‘P800’ to the customer.

This is the second time we have used the automated end of year reconciliation functionality on the National Insurance and PAYE Service (NPS). Like last year, the start of the issue of the P800s follows extensive testing which has gone well.

Once we start the process, we will deal first with cases where the customer has paid too much tax. P800 tax calculations will start landing on doormats towards the end of July. We hope to complete this work by the end of September.

We will send tax calculations to customers with underpayments later in the year. We expect to complete the work for customers where we hold all the relevant information by the end of December. This will allow time for customers to query or object to the calculation before the start of the 2012-13 annual coding programme. For most customers the underpayment will be included in the 2012-13 tax code. In cases of financial difficulty we can make alternative payment arrangements.

You will recall that last year we temporarily increased the £50 tolerance to £300 for 2008-09 and 2009-10 because of the number of calculations we expected to produce and to best manage the process operationally. For 2010-11 the tolerance has reverted to £50. The return of the tolerance is a sign of restored service, and we do not have the justification for a higher tolerance as we did last year. The tolerance will remain at £300 for the years 2007-08 to 2009-10.

We are in a much better position on PAYE than we were last year and are starting the EoYR process several months earlier than in 2010. We ran a successful annual coding exercise with a very high accuracy rate compared to the issues that arose in the previous year. We are more up to date in dealing with customer correspondence and our contact centres are also providing a better service than this time last year.

I will let you know more about our progress on end of year reconciliation in these updates

Technical Team

30 June 2011