Processing of P11Ds creates new or additional P800 tax calculationsThursday, November 18th, 2010
The latest weekly informal update (dated 12 November) from HMRC to employer representatives explains how the tax liability adjustments as a result of the processing of P11Ds for 2009/10 will affect the issuing of P800 tax calculations to taxpayers. In addition to the explanation, there are also a number of FAQs aimed at employers and employees. References to “ECS” are to HMRC’s Employer Compliance System; references to “NPS” are to the National Insurance and PAYE Service.
We will shortly start processing 2009-10 P11D returns of benefits and expenses following the successful flow of the 24,000 cases I alerted you to last week. Processing P11Ds is a usual part of the annual PAYE cycle. P11D information is processed onto ECS then transferred to NPS. We temporarily switched off the interface between ECS and NPS as we wanted to make sure that the P800 tax calculations and P2 notices of coding it would generate were correct. We are sorry for the delay in getting to this stage and apologise for any inconvenience this may cause you, your clients or employees. From next year we would expect to start this work in July when the P11Ds are received.
We have completed robust testing of the interface between ECS and NPS. We are satisfied that it is working well and on 4 November we opened the interface to allow around 24,000 cases to flow from ECS to NPS. We moved to full live running today and we estimate that 4.7 million P11Ds will flow through from ECS to NPS between now and mid-December. Not all of the P11Ds will prompt a tax calculation (P800). We expect around 600,000 to be generated. This is included in our original estimate of 5.7m tax calculations we expected to issue as part of our end of year reconciliation work.
An underpayment of under £2000 shown on a tax calculation for 2009-10 will be automatically included in the tax code for 2011-12. This means that the underpayment is collected as part of the tax deducted from salaries. Where an underpayment cannot be included in the code, for example, where it is £2000 or more, we will let the customer know and invite them to contact us to discuss payment options.
We will update the current year’s code with the most up to date benefits information to prevent underpayments from building up. At the point the code is updated we will send a revised P2 notice of coding to individuals and a revised P6 to the employer.
Employer Question and Answers – ECS/NPS
- As an employer I had to get the P11Ds to you by the 6 July, why has it taken so long to use the information?
Information from P11Ds is initially held on a separate system (ECS) before it is passed to the National Insurance and PAYE Service (NPS). We wanted to make sure that the information was correctly passed from one system to the other and any tax calculations and tax codes produced from NPS were correct. The testing has been rigorous and we’re sorry that it has taken until now to complete the testing and start the processing of the P11Ds.
- If you’ve failed to make use of information sent to you, can employees apply to have the underpayment written off?
The concession under which we can write off tax (Extra Statutory Concession A19) states that consideration can be given to forego tax where we have failed to make use of information received within 12 months after the end of the tax year in which it is received.
For example: on 6 July 2010 (in the year 2010-11) we received information on a P11D that an individual was in receipt of medical benefit which started in the tax year 2009-10. If we fail to make use of the information on the P11D by 5 April 2012 we would consider giving up any tax as this would be more than 12 months after the last day of the tax year in which we received the relevant information.
- I’m required to send you information about the benefits made available to employees. Why aren’t their codes always up to date?
Employers are only obliged to tell us during the tax year when a car is made available to an employee. Any other benefits are reported on form P11D at the end of the year. Employers are required to send the P11Ds to us by 6 July which is already part way through the next tax year. We then have to process all the P11Ds so it can be a few months into the tax year before we are able to adjust your code.
And issues that may be raised by employees:
- What should I do if I can’t afford to pay back all the underpayment shown in my notice of coding in one year?
If this is that case, please contact us on the number shown on your tax calculation or tax coding and we can discuss coding the amount over a longer period.
- I owe more than £2000 but I can’t afford to pay it back. What should I do?
If this is the case, please contact us on the number shown on your tax calculation and we can discuss the options available.
- I thought you weren’t collecting anything under £300 but you’ve told me I have a potential underpayment of less than £300 and that you’re going to collect it in next year’s code. Why is this?
The £300 limit only applies to underpayments which are finalised while we are reconciling the two years 2008-09 and 2009-10. It does not apply to potential or estimated underpayments which will not be finalised until after the end of 2010-11.
- I’ve already had a P800 tax calculation from you and received a repayment. You’ve now sent me another calculation that says I owe you money. What’s going on?
When the first tax calculation was sent to you we didn’t know that you had started to receive a benefit from your employer at some point in the last tax year. Your employer is not obliged to tell us this until the end of the tax year when details are sent to us on the form P11D. We’ve now processed the information on the P11D and recalculated the amount of tax due for the year.
At the time the original tax calculation was sent to you, our system was not expecting a P11D for you and so a tax calculation was sent. Now we know you have a benefit from your employer we will expect a P11D, in future. No calculation will therefore be sent to you until the P11D information has been processed and your records have been updated.
- But didn’t you say that you weren’t issuing any in-year codes this year?
Employers have provided us with information about expenses and benefits in kind and it’s important that we use that information to change tax codes in year. An in-year code change prevents an under or over payment accruing for the current year (to reflect, for example a new benefit such as a car). If we made no change, the customer would have a bigger underpayment at the year end than would otherwise be the case.
This will happen whenever new benefits in kind or changes to existing benefits in kind are reported. Such changes are different from those to the following year’s code connected to underpayments from end of year reconciliation.