FINANCE
Be prepared for automatic employee tax code changes
Newby Castleman, one of the Midlands’ leading independent accountancy firms with offices in Leicester and Loughborough, is advising business owners to pay extra attention to the real-time information (RTI) on employees’ earnings that they supply to HMRC. The warning comes as HMRC begins to make automatic changes to employees’ tax codes, which began last month based on the RTI submitted. As soon as HMRC becomes aware of a relevant change in the employee’s circumstances, an alteration will automatically be made to their tax code. The employer will be notified
of the new code and changes to tax deductions will be
effective immediately.
Previously, any change would have been subject to review, and may not have been made until the
end of the financial year. Steve Plant, Senior Taxation
Steve Plant
Manager at Newby Castleman, said: “Real-time information in itself is nothing new, but what we are now
seeing is HMRC making a concerted effort to use that information to cut down on their own administrative burden. Proactive, automatic changes will be made to employees’ tax codes so, theoretically, instances of overpayment or underpayment of PAYE tax should be greatly reduced. That will in turn reduce the number of corrective payments that need to be made at the end of each tax year.
‘Punitive action may be taken by HMRC if information provided to them is inaccurate or outdated’
“The risk of these measures is that the administrative
burden is simply transferred from HMRC to the employer. Those managing the payroll will now need to update the tax codes of their staff on a rolling basis, which is likely to make managing RTI and keeping records up to date even more time consuming. “It is vitally important for employers to ensure that
not only remuneration, but also non-cash perks and ‘benefits in kind’ are reported correctly. Punitive action may be taken by HMRC if information provided to them is inaccurate or outdated. We’d encourage employers to make sufficient allowances for the increase in time and resources that will need to be devoted to managing this reporting and if they are in any way unsure of how to approach this, they should begin by seeking advice from an accountancy professional.”
business network June 2017
53
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