Dealing with late tax code changes

KaelaH

I've recently taken on payroll for a new client, his previous book keeper sent me a list of tax codes / employee details etc so i set it all up using that.
However, I have now finally got access to him via HMRC and I notice there are loads of employees who have changes of tax codes that have never been done, even ones dating back into past tax year.
Now, I know that i can ignore last years and tax office will work out any differences and issue changes if needed. However, there are several that need changing for this tax year. I have made changes and dated them back to 6/4/11. There are though, 7 employees who have a tax code change not in their favour and, in one case, it has totally wiped his pay for this pay period, and probably the next!!. (They're paid fortnightly so am currently on period 3).
The thing i'm not sure about is whether they have to stomach changes or whether I can adjust them to W1/M1 and let any shortfall be worked out at end of tax year????

payrollpro

KaelaH,

You make changes to the notified code at yours, or your clients peril which ever way you want to look at it. HMRC are the only ones who can adjust the codes to W1/M1 so I would advise them immediately and await their response.

Best course is to leave the codes unchanged for these four but keep pressing HMRC for a ruling because the longer this goes on the worse it will be for the employees. Technically the W1 code will be lower than the cumulative code you have got but again that's HMRC's decision, not yours.

I would also advise the client that you have compliance checked the transfer, have discovered the discrepancies and are pursuing a solution. Leave it to them to determine if they want to warn their employees.

Payrollpro

KaelaH

Thank you so much, wasn't sure exactly what to do as I've always changed codes as soon as they come through

JodieR

When I first learned about PAYE codes about 10 years ago I was taught that you can never deduct more than 50% of the pay in tax no matter what the code is, so maybe that rule was made for situations like this! I can't remember the ins and outs of it and it may not still apply but might be worth investigating.

KaelaH

I called tax office and, an hour and a half later, they authorised me to put them
all on W1M1 and have made the relevant changes on their own system. I hate it when anything changes to the employees detriment, feel bad somehow.