Good news for those who need a little bit of flexibility when it comes to using the correct tax code, HMRC are implementing the new dynamic tax code issuing project.

 

Tax Code

Introducing the P6 Tax Code Correction

When an employer is submitting their Full Payment Submissions (FPS) with incorrect or mismatched tax codes, HMRC will step in. At this point they will issue a P6 tax code correction and the employer must take action immediately.


Phased Rollout but Not Enough Space for Everyone

Most of us will have to wait before fully taking advantage of this highly sought after project. Her Majesties Revenue and Customs are rolling out the project in phases. The Project will start with an initial 15,000 recipients and issuing it out to a further 15,000 in May. The initial phase will take place over 30 days to identify any complications along the way. A review will take place in June to assess the performance of the project and to plan the full-scale implementation.


A Tax Code Solution but a Slow Solution

Of course, these things never happen on an instant. It’s expected to take a considerable amount of time between being reviewed and issued a new tax code to that new tax code actually being applied to the payroll system. However, HMRC would argue that, with around half a million tax codes being wrong and a further half a million new starters being defaulted to undeclared status or emergency tax codes, that a corrective, albeit slow system will iron out any mistakes and stop an employee paying more than they should.


HMRC Targeting the Top Offenders

Employers argue that the operation of new starter declaration C with a 0T weeks 1/month 1 tax basis being acceptable. However, HMRC strongly considers this to be a data quality error on the part of the employer. HMRC are targeting the UK’s top 100 offending employers. The aim is to have them update their business processes to match the legal requirements under PAYE.


The Introduction of the New Starter Checklist

The past six years has seen a drastic change in the nature of payroll. It brought on the introduction of Real Time Information (RTI). Originally intended to phase out the P45 and P46 but that failed to materialise. Although, The new Starter Checklist eventually replaced the P46. It is the new employee’s responsibility to complete the new Starter Checklist. The new starter checklist lays out the employees’ student and postgraduate loans, even when there is a P45.


A Step Too Far?

However, despite payroll priding itself on being accurate and on time with the provision of new employment intake, the challenge of fulfilling the associated PAYE obligations to obtain and declare a new starter checklist appears to be a step too far for some large organisations. Employers are failing to notify a correct new starter declaration and associated tax code.


It’s All in the Timing

Whether it’s the employee being slow to complete another form, a timing challenge in obtaining the P45 from previous employment, or poor importing processes by employers resulting in the new starter checklist being ignored or considered irrelevant. Half a million is far too many for just a casual oversight.

 

So, if you’re failing to operate responsibly, HMRC may contact you and issue correcting tax codes very soon. Good thing we know what we’re doing at Moolah