Tax & Accounting News
PAYE under and over payments
15/11/2011
Millions of people have been told they have underpaid tax through the Pay As You Earn (PAYE) system, while other have underpaid.
While some of these have been caused by glitches in HMRC’s new computer system, many may be as a result of the tax system operating as intended, with HMRC undertaking reconciliations of taxpayer’s positions after the end of the year, experts say.
The Institute of Chartered Accountants in England and Wales (ICAEW) says that the 2010/11 PAYE reconciliation process is currently underway, with all 2010/11 repayments being dealt with.
According to the ICAEW, 2.3million paid had overpaid, with the average tax repaid to taxpayers standing at £297.
HMRC is now concentrating on underpayments, 1.2m of these have been identified and the average tax underpaid is £512 – about half the underpaid tax identified in the 2009/10 process.
For 2010/11, HMRC is using a de minimis of £50, below which it will not reclaim underpaid tax shown up by the reconciliation process. The de minimis for 2009/10 was £300.
HMRC implemented the NPS (National Insurance and PAYE service) computer system in summer 2009, with the aim of improving the operation of PAYE.
Previously, everything was done manually and was extremely labour intensive. HMRC inevitably struggled to keep up and fell behind as the organisation down sized.
The NPS brings together all a taxpayer’s records and so makes sure that allowances and tax rates are operated across all employment or pension income sources.
