PAYE Coding Notice Problems Uncovered

HMRC have had substantial problems implementing a new system to administer PAYE codes, it has emerged via an appendix to the department’s 2009-2010 accounting.

It has been estimated that there are 18.2 million unresolved cases involving PAYE coding notices and there may be as much as £1.6 billion worth of repayments still outstanding.

The National Insurance and PAYE Service (NPS) went live in June 2009, over 2 years behind schedule. In spite of this new system, there was an increase in processing errors in 2009-10. There was £132 million in underpayments and £238 million in overpayments.

54.3 million taxpayer records from 12 databases were moved to 45.4 million employment records in June 2009. HMRC had mistakenly thought that inaccuracies in the old data would be corrected by the transference of the information.

A report observed:

“Evidence from the initial operation of the new Service suggests that the Department did not fully appreciate the extent of risk from data inaccuracies or its implications for the delivery of PAYE. The department found that the new service had produced significantly more tax codes than expected. A significant number of the codes generated were incorrect.”

HMRC only became aware of the situation when their call centres were inundated with calls regarding erroneous coding notices, peaking at more than 18,000 calls per day.

Ricky Steedman