What a debacle!

It seems these days that tax is never out of the news.

The biggest story currently being discussed is that around six million people will shortly be receiving a letter from HMRC regarding PAYE (“Pay As You Earn” tax), the system by which HMRC collects tax from employees.  Most people getting these letters will be happy as they are due a refund but as many as one and a half million people will be told that they have paid too little and owe the taxman money.

If you’re wondering why this has happened it’s all because of HMRC’s new computer system.  PAYE was first introduced in the 1940’s when most people had one job and kept it all their working lives.  Things have changed greatly since then and HMRC’s records just couldn’t keep up with multiple job changes, allowances, tax credits and all the other changes that have happened to work practices and the tax system since then.

Now HMRC have a new computer which (they claim) has ‘joined up’ all this information and now has the correct position. HMRC has now started sending out “P800” tax calculations for 2008-09 and 2009-10 to and will be doing so until the end of January 2011.

What should you do if you get one?  If it’s a refund, cheer wildly and throw a party and if it’s a demand, weep quietly! Or perhaps not.  Remember that all the computer has done is draw together all the bits of information that HMRC holds.  That information might be wrong.  There might be information that HMRC doesn’t know about.  It’s worth checking your P800 calculation to see if it makes sense to you.  If it says you had five company cars and you didn’t have any, you need to contact HMRC!

If you DO owe money, HMRC will defer collecting it if the amount is under £2,000 and even if it is more than this will consider delaying collection if immediate payment would cause hardship.

There’s more information on HMRC’s website at: http://www.hmrc.gov.uk/P800.

If you are still worried or confused, contact your local accountant for helpful and friendly advice!

Talk to Barnes Roffe today
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