HM Revenue and Customs (HMRC) has updated employers on how actions that are being taken to correct a series of wrong employee tax codes may affect them.
Worries emerged earlier in the year that a significant proportion of the 25 million tax coding notices that are being issued may be incorrect.
The codes dictate how much employers and pension firms deduct in income tax for the coming 2010/11 financial year.
A number of people with one job have been receiving two (or more) tax coding notices with different codes. This is because HMRC’s new system, which combines information on NICs and PAYE details for the first time, has been failing to distinguish between current and previous jobs in all cases.
Without the full information on those taxpayers who have moved from one job to another recently, the new database has been treating them as if they are in more than one job.
HMRC has said that it has completed the task of identifying areas where there may be discrepancies on the new database.
The tax authority is now in the process of reviewing individual cases to correct as many discrepancies as possible ahead of the start of the new tax year.
HMRC is due to begin issuing P9s to employers.
However, firms are being warned that they may not receive as many P9s as they might have been expecting. Whilst most P9s will be issued as normal, HMRC said, the cases of those employees who are most at risk of receiving an incorrect tax code are still under review.
Consequently, employers won’t be getting a P9 for those employees until the doubts have been resolved.
Employers are being told that if they don’t receive a P9 for an employee, they should continue to use the existing code number for the year 2010/11.
HMRC went on to add that, if an employee contacts an employer because they think their tax code may be wrong, then the employer should get them to call HMRC on the number printed on the Coding Notice or on 0845 3000 627 so the problem can be sorted out.