HMRC cost cuts could lead to errors, warn accountants

Among the notices affected are the P2 PAYE Coding Notices and the P800 Tax Calculation, both of which have been sources of controversy of late.

The P2 PAYE Coding Notice tells you what your tax code is and how it is worked out. Employers or pension providers use this to determine the tax-free income individuals are entitled to over the tax year. The P800 Tax Calculation informs taxpayers whether they have paid the right amount of tax for the year.

In January, it was revealed that thousands of people could end up paying too much tax this year after being sent the wrong tax codes following a computer glitch at HMRC. In the last week it was reported that HMRC is in the process of writing to 5.7m people who have paid the wrong amount of tax via PAYE and of whom 1.4m will be expected to pay back an average of £1,380.

“The timing of this announcement couldn’t be worse,” said Andrew Shaw, a tax partner at top 20 UK accountancy firm Kingston Smith LLP. “Recent events show that there is the potential for significant PAYE problems, which can leave taxpayers confused and unsure of their position. In fact, many of those affected by the most recent PAYE incident involving underpayments are individuals aged over 65 who are entitled to some age relief. These taxpayers tend to rely heavily on their advisers to help them with their tax affairs.

“Withdrawing these letters means the onus will be on taxpayers to keep their advisers informed of any correspondence from HMRC whereas, in the past, this would have happened automatically. This could lead to oversights and increased enquiries to HMRC, as tax advisers endeavour to get to grips with their clients’ position,” said Andrew.

Other notices to tax advisers that will be withdrawn include the: