Computerised payroll

Discussion in 'Accounts & Finance' started by Jaydee, Jan 28, 2012.

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  1. Jaydee

    Jaydee UKBF Enthusiast Free Member

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    Perhaps a question for Tom, but does anybody know whether computerised packages should be able to deal with the abatement of personal allowances for high earners or whether the software requires that HMRC recognise that somebody has a high salary and issue a reduced or 0 code to deal with the problem?

    In other words, if an employee had a 747L or similar tax code, and a salary of £150,000 - should the software (a) tax only the earnings above £7,475 leaving an underpayment of tax if HMRC do not re-code in-year or (b) should it recognise that the entire salary should be taxed and "ignore" the operated code?
     
    Posted: Jan 28, 2012 By: Jaydee Member since: May 27, 2007
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  2. Tom McClelland

    Tom McClelland UKBF Ace Full Member

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    Abatement of personal allowances is handled by HMRC via the tax code system. There is no provision in payroll software specification for it. It would be an error for payroll software to attempt to compensate for abatement itself, since it has no way of knowing what an employee's tax code *should* be.

    HMRC's test data for developers takes no account of abatement of allowances in the high earner examples (correctly)
     
    Posted: Jan 28, 2012 By: Tom McClelland Member since: Feb 10, 2008
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  3. Jaydee

    Jaydee UKBF Enthusiast Free Member

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    It is odd that an employee who previously earned £90,000 (say) gets a pay rise to £120,000 and so underpays tax by thousands. I suspect that most employees presume "the tax must be right as all I have is PAYE income" only to find out that next year they need a K-code to correct it.

    Or is there a mechanism to inform HMRC in-year that an employee needs an abated code?
     
    Posted: Jan 28, 2012 By: Jaydee Member since: May 27, 2007
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  4. Bob

    Bob UKBF Big Shot Free Member

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    It's just happened to my niece's husband :( Got a bill for for £2,500 for last year to pay on 31st January, 8 months arrears @£250 in his November pay and £250 a month more tax after that due to 0 tax code :eek:
    .... and he allegedly didn't know about it :cool:
     
    Posted: Jan 28, 2012 By: Bob Member since: Jul 24, 2009
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  5. Tom McClelland

    Tom McClelland UKBF Ace Full Member

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    I think the employee can let HMRC know themselves by calling their tax office, if they're savvy enough to realise how the system works AND they'd like to pay the increased tax sooner than they'd have to.

    Once RTI is in operation it'll get far easier for HMRC to operate such micro-managed tax system adjustments. Whether making it even easier for ministers and HMRC to game the system is a good thing or not I'll leave as an exercise for the reader.
     
    Posted: Jan 28, 2012 By: Tom McClelland Member since: Feb 10, 2008
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