Press release: Opportunity for rethink on Simple Assessment and real time changes to PAYE tax codes

HMRC have announced that a number of the projects they were undertaking will be paused or stopped because of the extra challenges posed to the tax authority by Brexit.¹ Projects confirmed as paused include the rollout of Simple Assessment² for income tax and real time changes to PAYE tax codes (‘dynamic coding’).³

Yvette Nunn, Co-chair of ATT’s Technical Steering Group, said:

“Given the unprecedented changes which will result from Brexit, it is only sensible that HMRC seek to reprioritise their work.

“Two projects which have been paused – Simple Assessment and dynamic coding - have caused problems to date which still need to be addressed.

“There have been reports of inaccuracies in the information which HMRC have used in Simple Assessments to calculate tax bills. As a result, taxpayers are required to check these carefully once received, especially as they only have 60 days to correct any errors.

“Dynamic coding has caused some employees who have been paid a bonus early in the tax year, or who have uneven earnings, to receive an incorrect tax code which can lead to a tax overpayment.⁴

“While we welcome the pause to these projects, we strongly urge HMRC to use the extra time given to iron out the known problems with Simple Assessment and dynamic coding before they hit play on them again.”

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Notes for editors

1. The reprioritisation of HMRC projects was discussed at a Public Accounts Committee hearing on 30 April, and later confirmed in an email to representatives of ATT and other professional bodies.

2. Under Simple Assessment, the goal is for HMRC to use information that it already holds to produce the income tax calculation for certain groups of taxpayers, rather than require the submission of a self assessment tax return. 

Simple Assessments have been rolled out gradually, with the first Simple Assessments issued in 2016/17 to:

• Individuals who started to receive a State Pension in 2016/17 where that pension exceeded the personal allowance and;
• Taxpayers who are subject to PAYE, but where the tax due cannot be collected through the tax code, for example if it exceeds £3,000.

There were originally plans to rollout Simple Assessment to further groups of taxpayers, but these have now been delayed indefinitely. However, the ATT understands that taxpayers already in Simple Assessment will remain there.

3. In July 2017, HMRC began using monthly Real Time Information (RTI) data provided by employers to automatically adjust PAYE tax codes for employees during the year. This dynamic coding is intended to reduce the number of employees who end up with an under or over payment at the end of the tax year. 

4. Under dynamic coding, HMRC estimate an employee’s income for the tax year by taking details of earnings reported for the period to date and extrapolating these to a whole year. This can lead to problems if the employee has been paid a bonus in the period as the system does not discriminate between regular payments of salary and irregular bonuses. This leads to the estimated income for the year being too high, resulting in an incorrect tax code and a tax overpayment.