Debt Collection Through Payroll Services and PAYE

On 20 July 2011 regulations came into force for the first time to allow HMRC to collect up to £3000 through the payroll PAYE code. Responses to these changes are collated here within this document published on HMRC’s website: Summary of responses: Collecting debts through PAYE

The PAYE code has always been able to collect small underpayments of certain taxes by HMRC, but the change in regulations means underpayments and debts will now be collected:
•    Underpayments arises when HMRC reconcile information on PAYE (employee) taxpayer records following the end of the tax year; for example if a taxpayer has more than one job or more than one source of income or receives payroll benefits.
•    Debts are where taxpayers fail to pay what’s due on time and the outstanding sum gets referred to HMRC’s Debt Management team for recovery action.

HMRC will use this additional method of recovery for Self Assessment debts and Tax Credits overpayments. Letters will go out to selected individuals with outstanding debts from August 2011, and to Tax Credits claimants with overpayments due for direct recovery, from early October 2011.

The letters will notify them that the money they owe can now be collected through their pay/salary thus reducing their PAYE code. The tax code would then require adjusting to collect the debt over twelve months from April 2012. For individuals whom do not wish their PAYE code to be reduced, they should contact HMRC once a letter has been received.

Safeguards to prevent hardship and excessive deductions will still apply as usual for payroll PAYE.
Information about recovering debts from PAYE Payroll codes is published on Business Link website: www.businesslink.gov.uk/problemspayingHMRC




If you need anymore help or have any questions with PAYE codes then get in touch with us: www.citylightspps.com - we're always happy to help!