HMRC issuing incorrect Tax Codes

As a result of the first RTI returns, HMRC have issued a number of incorrect Tax Codes to employers. If an employee was not included on the Employment Alignment Submission or the first Full Payment Submission, then HMRC have treated them as a leaver and, subsequently, a new starter. The following is the advice given by HMRC:

Real Time Information: submissions creating new employments and tax codes

Where an employer:

  • has submitted only part of their employee payroll on their Employer Alignment Submission (EAS) and subsequently includes the remainder of their employees on a subsequent Full Payment Submission (FPS), or
  • submits their EAS in parts, but does not indicate on the first EAS that they will be submitting in parts, HMRC treats the first part as the full alignment submission, or
  • an employer uses their first FPS to align (rather than an EAS) and does not include all employments on that first FPS

once alignment is complete, any live employments not included by the employer will be ceased with a date of leaving of 5 April 2013.

We have investigated this issue and identified that in all the examples we have seen, when the employer sends a subsequent FPS, HM Revenue & Customs (HMRC) will create a new employment. That new employment record will not contain any benefits from the individual employee’s tax code. Therefore, the tax code that is issued for the new employment will be incorrect.

Employers should not operate the incorrect codes. They should continue to use the previous code.

If an employer or an employee receives a tax code where the benefits have been removed, they should get in touch with HMRC’s Taxes Helpline on 0845 300 0627 to get the benefits added back in and the code corrected.

Employers should ensure that they send HMRC details of all employees on their payroll, or, if they are sending their EAS in parts, indicate how many parts they will be sending.

Make what you will of that! How is the employer/agent to know which is the correct code to use? Hopefully, this will sort itself out but may take some time and effort.

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