Stephen Banyard, Business Customer Unit Director at HMRC said:

“We know that most small businesses want to get their tax right. But we also know too that failure to take reasonable care costs the Exchequer over £6bn a year, with a major cause being poor record keeping. We hope this series will raise awareness of the need for good record keeping.

“We also want small businesses to realise the benefits to them – such as improved cash flow – of taking better care of their records and paperwork.”

Presenter Hilary Devey said:

“Britain’s brimming with creativity but a terrifying number of businesses go bust each year and this shouldn’t be happening. I am going to teach businesses how to improve their all round business knowledge and direction, cash flow, marketing strategy and in some cases even their enthusiasm. Invaluable lessons they will never forget.”

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The codes tell taxpayers how much their employers and pension firms will deduct in income tax in the coming financial year 2010-11.

The Chartered Institute of Taxation (CIOT) says taxpayers could be asked to pay up to £108 a month too much.

The Revenue said it had no evidence of a widespread problem but advised taxpayers to check carefully.

“There will be some incorrect tax codes as there always are at this time of year,” said an HMRC spokesman.

“But the coding notice tells people what the code relates to and tells them to contact us if it is wrong,” he added.

‘Nasty shock’

The CIOT has called on the Revenue to launch a publicity campaign to alert taxpayers to the potential problem.

“Most people on PAYE are used to assuming that what the taxman sends them is correct,” said Andrew Hubbard of the Chartered Institute of Taxation (CIOT).

“But this year, many of them are being given wrong information, and unless they spot it and tell HMRC, their employer will receive the wrong information too.

“They could get a nasty shock when they open their April pay packet and see it is as much as a hundred pounds lighter than they are expecting,” he added.

It is not clear how many incorrect tax codes have been sent out, or may be distributed in the coming weeks.

The CIOT said the scale of the problem might be indicated by the fact that this year about 25 million coding notices are being distributed, which is about twice last year’s number.

The Revenue explained that the increase was a natural feature of the new system.

“It creates a single record for customers for the first time, and this, together with increased automation compared to previous years, is resulting in many more people having more accurate codes than before,” the spokesman said.

Computer problem

The codes have been sent out in batches in a process that started in the first week of January and which ends in the first week of March.
  If the whole of that personal allowance is wrongly applied that would cut a basic rate taxpayer’s pay packet by about £108 a month or £1,295 a year

CIOT
They go first to individual taxpayers in a P2 notice for them to check, before the code is sent to their employer.

However some people are receiving two or more more coding notices which are different.

The problem appears to lie with a new computer system designed to process the collection of income tax via the PAYE system, along with national insurance contributions.

The CIOT said the system’s database was failing to distinguish between current jobs and old ones, leading to tax codes being calculated on the assumption that someone has more than one job.

It said this was resulting in some people having their personal allowance split between two jobs, or allocated entirely to a job they no longer had, which would force their current employer to deduct too much tax.

“The personal allowance will be £6,475 for most people under 65 in 2010-11,” said the CIOT.

“If the whole of that personal allowance is wrongly applied that would cut a basic rate taxpayer’s pay packet by about £108 a month or £1,295 a year,” it said.

In a few cases the Revenue computer system has removed the personal allowance on the assumption that the person’s income will be higher than £100,000.

Earners above this level will lose their personal allowance this coming tax year, in a measure first announced by the Chancellor in the 2008 pre-budget report.

Accountancy Age

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According to the industry magazine Construction News the focus on what the taxman regards as “false self-employment” will continue after the holidays when responses to current consultation are also expected to be published.

HMRC believes many people working in construction are in effect “employees” but adopt self employed status to avoid tax and national insurance contributions.

Accountancy Age

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A paper from the charity recommends HM Revenue & Revenue takes part in a Tell US once pilot which allows the bereaved to report a death to s single government agency which would then notify all the other relevant bodies.

In addition the group wants HMRC to begin house calls and take steps to eradicate the overpayment of tax among the elderly.

John Andrews, Chairman of LITRG, said: “LITRG tries to join up the activity of HMRC with other departments, such as the DWP and we are continually frustrated at the silo mentality of ostensibly customer-facing organisations.

“People need the maximum support from all government departments at the time of bereavement.”

Accountancy Age

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Sage has warned businesses to prepare for the VAT changes or face the consequences.

The financial software provider has found that just a third of businesses will be prepared for the VAT changes before they close their offices for the Christmas period.

The VAT rate will return to 17.5% on 1 January 2010 causing disruption to accountancy firms and businesses in the New Year.

“This is cause for serious concern - managing the change for something as integral as VAT is not as easy as simply flicking a switch. In fact, it can be hugely complex for businesses both small and large,” said Kevin Hart, head of government relationships at Sage UK & Ireland.

“Those that fail to plan the changes now will pay the price later,” he added.

When the VAT rate was reduced this year, businesses were given just four days to prepare for the amendments. Sage has said that its VAT development team and support staff had to work around the clock to prevent widespread disruption.

There are special arrangements being drafted for certain businesses operating beyond midnight on 31 December.

Sage is advising its clients to get in touch with their accountants as soon as possible to discuss how the changes will impact them.

Accountancy Age

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Those paying income tax at 40% already face the prospect of a higher 50% band being introduced in April next year, but they may also be hit with a higher NI rate as the government tries to boost tax take.

Stephen Herring, senior tax partner at BDO said that chancellor Alistair Darling is unlikely to introduce a jump in the basic rate of income tax or another rise in the higher rate, but would be “less surprised if he were to introduce further increases in national insurance, where he could increase the upper earnings limit or contribution rates”, reported Citywire.

Herring also predicted more restrictions on personal tax reliefs, anti-forestalling measures to stop companies bringing forward dividend and bonus payments before the 50% rate is introduced, and yet more anti-avoidance legislation on bonus structures.

Paul Grant - Accountancy Age 18-11-2009

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Missed the 31 October deadline for tax self-assessments? Use Davenports, we file everything electronically giving you until 31 January 2010.

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