HMRC has decided to rethink its policy of just sending documents to taxpayers and not their agents. The new policy, which was introduced in September, was designed as a cost saving measure.

However, the Revenue has backtracked slightly and said that some documents will also be sent to tax advisers and contractor accountants.

The decision has been welcomed but the CIOT, but the Institute remains concerned that this change will not include all tax documents.

The CIOT’s deputy president, Anthony Thomas, said that we all know government departments are under pressure to cut costs but HMRC is likely to face more queries and adjustments by keeping agents in the dark about the tax obligations of their clients. This action could end up costing the government more than it saves.

The documents that will be sent to agents include Tax Calculation P800, Entry to Self-Assessment letter SA250 and Exit from Self-Assessment letter SA251.

Agents will not receive copies of their clients’ P2 PAYE Coding Notices but the form the taxpayer receives will advise him to show it to a tax agent or adviser.

HMRC plans to use some of the money saved from the withdrawal of P2 agent copies to create an IT solution allowing e-enabled tax agents to see the P2s of their Self-Assessment clients online.

Meanwhile, members of ICAEW have said the standard of service provided by the Revenue is still declining. 70% of members said they needed to contact HMRC more than once to resolve a single enquiry and 61% said the technical knowledge of many of the Revenue’s employees leaves much to be desired.

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Finance professionals and contractor accountants do not believe that the government’s proposed plans to overhaul the PAYE system are satisfactory.

Last week, HMRC released plans for the significant reform of the PAYE system since its introduction 66 years ago. With the new system, employers would remain responsible for the calculation of NIC, PAYE and student loan deductions and that information would be sent to HMRC via the BACS system when the employer runs the weekly or monthly staff payment run.

One of the fears amongst tax experts is that the Revenue is not famed for successfully implementing new IT systems. The most recent example being the chaos that ensued earlier this year when taxpayers were sent incorrect coding notices due to a data migration project.

Karen Thomson from the Institute of Payroll Professionals said that whilst the idea is good in principle, there are certain issues that need attention before the organisation would support the proposal.

One concern is that employers would be giving employees a payslip that does not tell them their take home pay. The chairman of BASDA’s payroll special interest group, Andrew Dove, said that this could have a negative impact on low paid employees and people who work fluctuating hours. Payroll software providers are also concerned that the new proposal will kill standalone payroll products. Although the payroll year end bottleneck would be eliminated with the new system, it would make more sense to process real time information through existing payroll software and the current government gateway, Dove added.

Tax specialists are agreed that further research and consultation is required before a new scheme is piloted. Baker Tilly’s tax director, Lesley Fidler, hopes the new initiative will be researched fully, piloted adequately and funded sufficiently before it is generally adopted.

At present the proposed reforms are at the discussion stage and suggestions from professional organisations will be taken into consideration before a formal consultation document is issued.

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HMRC is urging sole traders and contractors, as well as employees, to get in contact with their local tax office if their tax code looks unusually low or high.

Contractor accountants should also be vigilant, however it is unlikely that they would be able to spot all errors across their client base. Therefore they should advise contractors and sole traders to check their own tax codes where possible.

HMRC recently updated it’s PAYE and NIC system which is believed to have caused the errors.

Most people will have a personal allowance of £6,475 in the tax year covering 2010 and 2011. Those with an incorrect tax code will be paying the wrong amount of tax from the start of the new tax year from April 2010.

If you believe your tax code may be incorrect, have a look at HMRC’s notes included with the coding letter or go to the HMRC website for information. If you still believe there is an error, HMRC have opened an advice line 0845 3000 627 specifically for those with a tax coding issue.

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