As part of their regular informal updates for Tax Agents, HMRC have provided further clarification regarding the ongoing issue of PAYE reconciliations.

HMRC wish to stress the context in which these updates are sent; namely as informal highlights and as a result of working in partnership with Agents and Representative bodies such as Chartered Accountants Ireland.

An extract from the most recently received Update is provided below.

• “You will no doubt have noted the media coverage about HMRC issuing end-of-year calculations telling people if they have underpaid or overpaid tax. I thought it might be helpful if I provided you with some information to help with questions you may be asked.
• The end of year work we are doing now is part of the normal PAYE annual cycle of work. The difference this year is that with the introduction of our new computer system – the National Insurance and PAYE Service (NPS) - the process is automated. With our old system we had to clerically review any case that didn't reconcile as balanced. In any year the vast majority of cases, (in excess of 40m), would reconcile as balanced.
• We have done a huge amount of testing to ensure the new system will work as expected and that we issue correct calculations. We are also reconciling the two years 2008/09 and 2009/10 together, because NPS end-of-year functionality was not available last year.
• Last weekend we started to issue the first batch of calculations (the batch was forecast to produce some 45000 outputs on form P800). This is the final stage of testing, focused on the customer response and how we manage that (especially how our contact centres support customers). We will review all of that before taking the decision (all being well) to proceed later this month, or early next, to full live running. That will involve issuing about 4.3m calculations showing overpayments and about 1.4m telling people they have underpaid tax through to the end of the calendar year. Only those with an over or underpayment will get a notice from us. As has already been widely publicised, we have decided to forgo the collection of smaller underpayments of less than £300 so that we can focus our resources on higher priority cases.”

HMRC have recently simplified the claims process for this. For those readers not familiar with ESC A19, this allows HMRC to forego the collection of tax, in certain limited circumstances, where HMRC have failed to act on information preventing the underpayment.

Furthermore, the interactive messages on HMRC's Helplines now take account of the P800 calculations whilst directing callers to further help and advice on HMRC's website.

HMRC also have plans in place to move extra staff over to National PAYE Service work to help them cope with expected increased demand should this be needed and they wish to stress that they will continue to monitor staffing resources to ensure taxpayers needs are met during this period.