PAYE - Tax code issue P6

[mc25]

Hi all, its a while since I have visited this forum. Anyway, this is a good one. Received a P6 code from HMRC for one of my client, changed the code to what they need it to be (BR), and when I run the payroll, the employee Nett pay comes to Nil as they have taken all the tax and NI on one go. Has anyone every come across this before?



Thanks

[Monsoon]

I've not come across it before, no. On a K code it can't take more than 50% of the total pay (I think).
If you're using decent software then one presumes it's correct? Scary.

[deanshepherd]

What software are you using?

[mc25]

I am using Payroll Manager. Anyway Managed to get the employee to ring HMRC and they have now faxed me a new code apparently it was a computer error issued the wrong code. but I am concerned why when I changed the code it deducted the tax and NI all at ones.

Thanks for replies.

[NeilH]

Hi

When I have received codes like this in the past (any that increase the amount of tax payable) they usually come as a week 1/month 1 basis, unless they are issued for the beginning of the new tax year.

Neil

[zara5034]

Usually the reason this happens Mc25 is because the BR code issued was originally a cumulative code, your software has correctly taxed all the earnings to date in the tax year, sometimes this even causes the net pay to come out as a negative figure. If this was the other way around and the code was being changed from BR to 747L for example, it would generate a tax rebate.

Luckily you did the right thing and called HMRC as most employees can't afford to lose their entire months salary in one hit. HMRC will usually then amend the code to BR Week/Month 1 and will contact the employee separately to sort out any underpaid tax at the end of the tax year.

I am curious as to why your software also deducted a large sum of NI. Is he or she a Director?

[mc25]

Thanks once again for your replies.

I am curious as to why your software also deducted a large sum of NI. I rang the payroll manager to double check this as as far as they are aware that is correct. But to be honest something still tells me this is not correct as from my experience and from what I remember when I did payroll, HMRC normally will spread the tax owed over the years even if they have to carry it forward to the next year (Unless something have changed recently and I have missed this update). So I just said its ok as I have managed to sort it.

Is he or she a Director? No, just a normal employee.

I just thought its not fair for somebody to have worked the whole week and dont have any pay,grrrrrrrrrrr!!! Glad its sorted though but there are still alot of question pending Why did this happend, and is this really correct??

All I can say is I am so glad I managed to sort it out instead of telling the employer this particular employee hasn't got any pay this week

[payrollpro]

Zara is right, what the software did for income tax is spot on as there is no regulatory limit attached to a BR code, only a K prefix one. What is at fault here, and it's not a computer error, neither is it an auto coding issue at HMRC, is that once the tax year is well under way they are not permitted to issue a cumulative BR code, it has to be week 1/ month 1 otherwise you experience the result you got.

I would hesitate to investigate further on the tax because thats the result of HMRC failing to apply human contact to a code they are issuing. What I am concerned about is your comment about NI. Presumably all year so far the NI has been worked out in the usual pay period by pay period manner and if you did not accidentally reset her as a director for NIC's then there is no reason to recalculate NIC in a single week, and even if the system did, then all the NIC worked out previously would have cancelled it out, wouldn't it?

Payrollpro

[zara5034]

That's what was baffling me Payroll Pro, I couldn't see a reason that the software would deduct a larger amount of NI either?

[KaelaH]

From what I understand, BR is always w1/m1, never cumulative (that's what lady at HMRC told me anyhow) so shouldn't have deducted more than the 20%
As for the NI, I have no idea. Does your software give you breakdown of calculation?

[deanshepherd]

Are you sure you didn't just miss the W1/M1 part on the original P6?

[zara5034]

In my experience Dean this is a common error on HMRCs part. Lost count of the times I've had a BR code issued on a cumulative basis and had to phone them up to prevent the above situation happening.