Payroll query - Tax codes

ExcelAnt Registered Posts: 80 πŸ’« 🐯 πŸ’«

We use Sage payroll to run our payroll and last week HMRC sent us new tax codes for several employees.

These stated Effective date : 6/04/13 (April)

My boss in her wisdom clicked apply and by the logic of "it let us apply so it must be right" has used these tax codes to run the final payroll for the year

All these tax codes went from 7XXL to 9XXL, Thereby giving employees tax back.

It is my understanding these employees had reduced tax codes due to benefits in kind, and these new codes are to reduce the increased personal allowance for tax year 13/14. Not to give a tax benefit in the 2012/2013 tax year.

I have a gut feeling this is wrong...very wrong....but attempted to raise it at the time and she simply went ahead and used the codes, despite them saying "effective from...."

Any advice aand clarity is welcome.


  • jenny3549
    jenny3549 Registered Posts: 472
    I'm afraid that you are right and your boss is wrong!

    The codes are for the new tax year and must not be used in the current tax year - hence the effective from date on them. Sage payroll let you apply them because it doesn't know the start date for them - you can amend tax codes at any point throughout the year so the system will always let you enter a new code - it's a great system (I'm a big fan) but it's not pyschic.

    Unfortunately you will need to roll back and re-run that payroll otherwise things for this tax year will be totally askew.

    The only thing you can do is urge your boss to re-run. Otherwise HMRC (and the employees) are going to be rather peeved at having new codes re-issued again when the P35 is checked a few months down the line!
  • ExcelAnt
    ExcelAnt Registered Posts: 80 πŸ’« 🐯 πŸ’«
    Just lightly queried to see if it's right. Seems adamant and won't be budging. Apparently she asked Sage support and they said it's ok.

    Netiher of us have ever done payroll before, but I know this is wrong.

    Guess we'll just wait for the tax codes to catch up later in the year and I can have a little "I told you so moment with myself"

    Thanks for confirming Jenny. put my mind at rest, even if it is still wrong I know by principle I'm right.
  • jenny3549
    jenny3549 Registered Posts: 472
    No problem!

    Don't know how Sage would have told her it's ok though! Effectively (assuming the new codes are cumulative which they usually are for the new tax year) your Boss has told the system that those employees should have been on tax code 944x (for example) for the whole of this tax year so it has recalculated all the employees as if this had been their code all year - hence the refunds!

    HMRC will not find out about this until you submit the end of year returns and it could then take a while before its picked up on and new codes sent out again for the employees - which will then be lower to claw back the underpaid tax for this year! I can only imagine trying to explain that to my employees in a few months time!!! I'm sure I'd get something along the lines of 'well, it was your **** up, why am I paying for it now?'

    At least you've raised your concern so you can legitimately point them at your boss when the time comes!
  • NeilH
    NeilH Registered Posts: 553
    Don't know how Sage would have told her it's ok though!

    Depends on a) did she actually contact them? b) since outputs are only as good as inputs, what information did she give to them regarding the issue?

    The big clue here is that (as I recall) not only do coding notices have an effective date, they also state the relevant tax year (2012/13 or 2013/14).

    You could reveiew the payroll and show your boss any major fluctuations in individual tax payments/refunds (could this include her's and your's?), otherwise sit back and practice your "I told you so" face! Also, do let us know the outcome (or should that be "fall out"!) in a few months...

  • ExcelAnt
    ExcelAnt Registered Posts: 80 πŸ’« 🐯 πŸ’«
    Lol thanks for the input guys.

    It's very much a case of i've attempted to convey my opinion. concerning Sage support it was mentioned in passing during another query I believe, so maybe not a comprehensive answer from them.

    Result will be : Pray my mat cover contract ends prior to this, if not i'm moving on anyway. More money maybe, but something more challenging than 15 SL invoices and 40 PI per month, along with bank recs....not much work makes me a dull boy :)
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