2017-18 in year adjustments to PAYE codes being incorrectly treated by HMRC as brought forward underpayments – latest

By Technical Team on 28 Jan 2019

LATEST – HMRC have announced that this issue has now been fixed.  An update was posted on the Agent Forum on 28 January, which says the following:

“HMRC can confirm that a fix was implemented at the end of last week. The same info previously supplied regarding correction of accounts still applies. The accounts of anyone affected should be corrected and an amended SA302 issued, and for anyone filing after its implementation the issue should not arise. In the meantime, if an agent contacts the Agent Dedicated Line (ADL), HMRC will correct their account for them”. 

HMRC started to include “in year adjustments” in PAYE coding notices during 2017-18.  These attempt to collect the right amount of income tax on current year income during the year itself. This is often referred to as ‘dynamic coding’. HMRC explained how this is supposed to work in this Talking Points session.

It became apparent several months ago that HMRC’s systems were incorrectly treating some “in year adjustments” as brought forward underpayments. HMRC’s own tax return software was incorrectly automatically pre-populating them into box 7 of the Tax Calculation Summary (SA 110 2018 Page TC1) - the box for “Underpaid tax for earlier years included in your tax code for 2017–18”.  Agents were noticing that, despite submitting tax returns showing the correct position, HMRC’s systems still processed them as if the “in year adjustments” were brought forward underpayments and Form SA302 Tax Calculations were being issued by HMRC showing the incorrect figure.  Some agents reported that a call to the Agent Dedicated Line usually resolved the problem but that it was creating unnecessary additional work both for them and for HMRC.

A fix had been promised by HMRC several months ago, but recent cases posted on the Agent Forum indicated that the problem was persisting. On 9 January 2019, HMRC posted the following message on the Forum.  We are highlighting this to members as it is not clear that HMRC are intending to issue any wider communications. 

“Thank you for your comments and questions on [this issue]. We are aware of the issue, which affects returns for 2017/18. We are working on a fix and hope it will be implemented within the next week. The accounts of anyone affected should be corrected and an amended SA302 issued, and for anyone filing after its implementation the issue should not arise. In the meantime, if an agent contacts the Agent Dedicated Line (ADL), HMRC will correct their account for them. We’re sorry for the inconvenience this has caused. We will post an update on this forum when the fix has been introduced”.

If members continue to encounter this problem in the days leading up to the 31 January 2019 filing deadline please let us know by emailing technical [at] ciot.org.uk.

Technical Team

Posted in: Technical News