End of Year Reconciliation - live running
At the start of September, we sent out a relatively small batch of around 52,000 P800 calculations to customers who have overpaid or underpaid tax.
Reconciling people’s tax after the end of the year is a normal part of the PAYE process. But this is the first time we are doing the reconciliation using the new National Insurance and PAYE Service (NPS) IT system and we are doing two years at once as it was not done last year. The overwhelming majority of PAYE cases (more than 40m) are correct – so most people have paid the right amount of tax.
Over the last couple of weeks we have carefully reviewed the outcomes of this exercise. A few minor issues with the system came to light. We have put fixes in place for those and tested them to ensure they work. Contact from customers who received P800s has been low, and our Contact Centres have coped very well with the level of demand.
We have taken on board comments about how we could improve the explanatory notes sent with the P800s. These will be available shortly.
We are confident that the system is in as good a shape as it can be so we have moved to full live running. This means that the next batch of Forms P800 will start arriving this weekend (9th and 10th October).
We expect to issue around 90,000P800s a day and hope to have completed the bulk of this exercise before Christmas. In total, around 4.3 million taxpayers will receive repayments, while an estimated 1.4 million will be sent letters explaining that they have underpaid along with an explanation of the Department’s calculations and how they can have the underpayment reviewed.
End of Year Reconciliation - live running (latest update)
Employers and representative bodies have asked us for more information about timelines and volumes so that you can manage the expectations of your employees and clients. NPS will attempt to reconcile every PAYE record. But, as has always been the case with the end of year process, there will be a minority of records where all the information needed is not available until much later. Around 80% of PAYE cases are correct and we will not send P800s to these customers. We hope to issue the bulk of the P800s by Christmas, with the remainder in January 2011.
You have also asked us for more information following last week’s update especially about the process of coding out, the appeal process, how to avoid paying interest on underpayments of £2000, and the £300 tolerance limit.
- The vast majority of P800 notices will go to those owing under £2000. The amount will automatically be “coded out” in 2011-12. Customers in financial difficulty can ask HMRC to spread payment over a maximum of three tax years’ tax codes. No interest will be charged at any stage.
- Where for some reason, the underpayment can’t be coded out e.g. where it is £2,000 or more, or the PAYE source is insufficient to allow coding out or has ceased, we will not be expecting customers to pay until after 31 December 2010, and will write to customers after this date about how to pay. No interest will be charged provided the customer reaches agreement with us on how the money will be paid back, and makes those payments.
- Because of the number of calculations we expect from the reconciliation, we have temporarily increased the tolerance to £300. We expect this to reduce the level of customer contact and help us provide an acceptable level of customer service.
- If a customer thinks their calculation is wrong, they should contact us on the number shown on the P800. In the vast majority of cases any corrections can be made at the time of the call.
When we processed the initial batch of customer records in September we generated 42,000 overpayment calculations and 11,000 underpayment calculations. We carefully monitored calls to our contact centres related to the notices, as well as customer correspondence. The customer response was broadly as forecast; around 1.7% of customers with an overpayment contacted us and approximately 33% of those with an underpayment got in touch. A quarter of customer contact was handled by our IVR messaging. In particular only 10% of customers phoning about an overpayment needed to speak to an advisor. Many were simply chasing the arrival of their repayment cheque (which is produced by a separate system so goes out separately) and were satisfied with the IVR message telling them when to expect their cheque, asking them to ring back only if the cheque hadn’t arrived within this timeframe.
If customers who receive P800s don't agree with the P800 or want clarification including when they will have to pay what they owe or get back any overpayments, they should refer to the P800 Notes (Understanding your Tax Calculation) and the P800 flyer ‘What Happens Next?’ sent with their P800. There is also more information at http://www.hmrc.gov.uk/p800/paye-tax-calcs.htm.
You may be interested in our webpage at www.hmrc.gov.uk/p800 which we introduced on 6 September. This has been updated to include the revised P800 Notes and the new flyer.
Paper P14 forms
I’d like to tell you about some changes that we are introducing as part of our commitment to encourage increased use of technology. The volume of paper P14 forms HMRC has issued and had returned by employers and their agents as Employer Annual Returns has significantly reduced over the last twelve months. This has been driven by both the legal requirement for virtually all employers to file their Employer Annual Return (P35 and P14s) online and the austerity measures we must take to reduce costs. We have identified two further measures we must now take to make additional savings.
HMRC no longer require those employers who use paper P14 forms to provide us with two copies of the P14 for each employee. Consequently, we will be changing our P14 stationery from a three-part form to a two-part form with effect from 2010/11tax year to reflect this change. Furthermore, whilst HMRC’s Employer Orderline will continue to supply P14s only to the tiny minority of employers that are exempt from the obligation to file their returns online, from 2011 it will only hold a stock of the manual completion version of the two-part P14. HMRC will no longer produce and provide the continuous and laser sheet versions of the form P14. We continue to look at other changes to the products sent by the Employer Orderline and will keep you informed as these progress.