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By July 2017, dynamic coding began to roll out. It consisted of numerous trigger points which can cause the issuance of a new code.

The objective of dynamic coding is to decrease the P800 computations that are created at the end of the tax year. What makes these P800 forms important is that in spite of the PAYE’s operation, there are overpayments or underpayments of tax.

Dynamic coding intends to apply the new information from the employers or taxpayers for the recalculation of the estimated pay for employees. Afterward, if it is deemed important, change the existing tax code in use for getting a more reliable tax deduction.

Starting in April 2019, the HMRC started a new coding trigger called “controlled go live.” In this process, a comparison is conducted of an employee’s reported tax code on the FPS where HMRC matches it with code that it assumes to be issued for them, according to the PAYE and Natural Insurance. In case the code match fails while the code was not implemented by the employer for a time period longer than 60 days, a PAYE code gets reissued to them by the HMRC’s automated system.

In the comparison of tax codes, the computer of HMRC ignores the suffix such as M, T, or L. Similarly, it also overlooks whether the code is WK1 or MTH1.

In case, the employer has not used the code, the HMRC computer performs a recalculation to check the validity of the HMRC held code and reissues it upon confirmation. If it is invalid, a fresh PAYE code is issued by the HRMC for both the employer and employee.

In the second month of the control phase, new codes were issued by the HMRC for the initial 30,000 mismatches that were identified. Meanwhile, they collaborated with a few chosen employers to prepare and address any unpredicted issues.

It is estimated by the taxman that in June, the reissued codes will experience a surge whereas the project’s complete “go live” gets confirmed after sometime.

HMRC has identified that 500,000 new employees are being defaulted to an “undeclared” starter declaration. This begs the following questions.

  • Before the payroll run, do the tax codes of employees are downloaded by the agents and employers?
  • Assuming, they do get the paper codes, what is the accuracy of the address and contact information of the employer on the employees’ HMRC record?
  • Is the employer certain about the receipt of codes?

 

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