Taxpayers could end up paying nearly £1,300 a year too much because of a new computer system

You will, doubtless, have seen such lurid headlines recently in the press and there may well be many more to come and we thought that we should put a Moorepay perspective on this issue.

HM Revenue and Customs (HMRC) has a new national computer system - the PAYE Service is hosted on a new system known as the National Insurance and PAYE Service (NPS). This brings together what used to be the National Insurance Recording System (NIRS) and the PAYE elements of Computerisation of PAYE (COP).   HMRC has successfully loaded 45 million unique records, restored IT services to HMRC's National Insurance Contributions Office on schedule, and to the Department of Work and Pensions ahead of schedule. National Insurance contributions and PAYE will still be deducted separately by employers and pension providers but HMRC will process these deductions using the NPS system.

Consequences anticipated by Moorepay

We expected the implementation of NPS to create some problems. One of the results of NPS was that the 12 regional databases have been combined into a single national database. Taxpayers who have tax affairs in the different regions now have all their tax affairs handled together which is a good thing as it means that HMRC can tax them properly at source at the time things happen rather than tax based on a number of separate entities which then need to be brought together to establish the overall situation.

This is better but gives a once off hit where the taxpayer is paying retrospectively for the previous year and currently under the new system. Some people will doubtless be adversely affected but it means that they are paying their tax when it is due rather than a year later.

There are 60 million tax payers and 12 databases have been merged onto 1. Some taxpayers will have details from several databases being brought together as a single record and it is inevitable that the processes used to determine which details to use when they differ will end up producing outcomes which might bear scrutiny. Equally it is to be expected that there will be an error or two. This should not come as a shock to anyone involved with payroll.

So, in summary we expect some errors.

Sample errors experienced by Moorepay

It has been suggested that 150,000 tax payers have been wrongly coded for fuel. If this is £3000’s worth of fuel then tax at 40% is £100 reduction in a month’s net pay. This problem has been identified and rectified by HMRC such that the correct coding will be sent on the P9 to the employer and a corrected Notice of Coding (P2) has already been sent to affected individuals.

We are also aware of someone who appears to have “lost” all his free pay.  There will doubtless be a lot of taxpayers whose “main” earnings are being taxed at 20% or 40% whilst a minor pension is getting the proper tax code giving free pay which can’t be used.

All such issues should be resolved by normal contact with the tax office between the time of receipt of the apparently incorrect Notice of Coding (P2) and the effective date of operation which is on or after 6th April. Telephones will be busy and patience will be required but at the time fr writing it seems reasonable to assume that it will be handled. HMRC have a lot invested in NPS and they are going to work hard to deal with the inevitable problems.

Contacting HMRC will require some patience.

Sample errors experienced by Moorepay

Within Moorepay we are aware that a problem may be brewing and we are ensuring that our customers are advised – thus this article (obviously we are also ensuring that our staff are fully briefed)
For individual taxpayers who are concerned about their new tax code they should be encouraged to pursue it individually with their tax office. 

It has to be the taxpayer who pursues this – HMRC will not deal with the employer nor Moorepay as the managed payroll service provider.  With 60 million taxpayers and 25 million P2s it will be understandable if some errors are not resolved so individuals should be advised to keep up the pressure on HMRC to have their issues resolved.