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PAYE is back in the news again. The process of reconciliation has hit the headlines once more with the announcement that HMRC will be sending out 450,000 letters over the next three months notifying people of tax underpayments for the year 2007-8.

The CIOT and our Low Incomes Tax Reform Group (LITRG) have again been much in demand to explain what’s going on to the media and taxpaying public. John Andrews of LITRG, recent winner of a 'tax transparency award' has been featured in the Daily Mail and the BBC News Online website, commenting on the impact these reconciliations will have on those with low incomes, especially pensioners. Patrick Stevens, CIOT Vice-President, explained to 5 Live listeners last night what they should do if they receive a letter. Earlier in the day, John Whiting, CIOT Tax Policy Director, told Radio 2's 'Simon Mayo Drivetime' what was going on and why HMRC have undertaken these reconciliations.

LITRG, and John Andrews in particular, deserve great credit for persuading HMRC to write off underpayments for a great many pensioners. HMRC estimate that there are about 250,000 cases from 2008-09 and 2009-10 where a taxable state pension was paid by the DWP and the tax due on this pension should have been collected through a tax code adjustment, but wasn’t. These pensioners would have a very strong case for their underpayment to be written off in line with the ESC A19 concession. Rather than require them all to go through the bureaucratic process of claiming the concession, HMRC have agreed to write off all the relevant underpayments.

Information and guidance on what to do if you get a reconciliation letter for 2007-8 will be posted on the LITRG website in the next 24 hours. There is already guidance on the site for people who get 2008-9 and 2009-10 letters, the last few per cent of which are still going out.

You may be wondering what the cloud is. Most usually any reference to 'the cloud' is to cloud computing. Google has a range of explanations about what this is, but basically cloud computing is a style of computing where resources are provided as a service over the Internet. Users also do not need to maintain or indeed know anything about the technology in their 'cloud' - which is an attractive option if turning the server off by mistake is a favourite office pastime.

Does this affect you? You probably don't know and probably don't care. You may, however, already be an enthusiastic user of cloud computing without having realised that you are. Have you ever used a web-based email address such as Gmail or Hotmail? Or maybe you have signed up to a @cta.org.uk account? All cloud computing - software and servers you don't need to maintain, upgrade, store on your computer harddrive or even think much about.

Ever used online banking? I access my current account online from different computers; I don't know where this data lives and I don't really want to know. I just want to be able to access my bank account details easily when I need.

Cloud technology is developing fast and becoming increasingly popular. According to the results of an October 2010 US study by KPMG LLP 90 percent of executives and 68 percent of middle managers surveyed said they are using or plan to use cloud-based services within two years.

Most companies fulfil their computing needs by buying the necessary hardware and software packages. They buy multiple software licenses for multiple employees - broadly speaking, if you have eighty staff all using Adobe PDF then you would buy eighty licenses. Cloud-based technology allows businesses to buy per user based on use which may work out significantly more cost-effective. If your eighty employees used Adobe PDF for three hours a week then you would only pay for the actual resources used. The software is accessed solely through the internet so the most current version is always available and you don't need to worry about installing or upgrading anything, which also frees up your time for doing actual tax work (should you be so inclined!)