Nick Huber, Accountancy Age, Tuesday 7 September 2010 at 15:23:00

Payroll departments and suppliers braced for six months worth of employeequeries

Company payroll departments and payroll services suppliers will be dealingwith tax queries from employees for up to the next six months after it emergedthat millions of people have paid the wrong tax, experts have warned.

As HM Revenue &Customs begins to write to around six million people who have paid eithertoo little or too much tax and national insurance under the Pay As You Earn(PAYE) system, small businesses with limited payroll staff will face the mostdisruption.

"Some people will have queries for their payroll department," said BillDodwell, head of tax policy at Deloitte. "If you have several million peoplewanting extra copies of their P60s it's could create pressure for [for payrolldepartments]. It'll probably take three to six months for accountants andpayroll departments to deal with these queries."

David Whiscombe, partner at BKL Tax, a tax consultancy, and member of the taxpanel at the UK200Group of accountants and lawyers, said the payment errors forthe tax years 2008-09 and 2009-10, underscored the need to reform PAYE.

?While it?s always popular to knock HMRC for getting it wrong, this isn?twhat?s happened in this case," he said. "The simple fact is that the PAYE schemewas never designed to cope with the complexity of today?s tax system. It?s beenfailing to do so for years and the systematic errors reported over the weekendaren?t new, it?s just that the introduction of a more sophisticated computersystem has brought them to light for the first time."

He added that the Office ofTax Simplification, which was set up by the government in July, provides anopportunity to streamline the tax system.

The government is consulting on plans to give each employee be given a singlecomputerised taxaccountwhich brings together their employment and NI records, giving HMRC real timeinformation of all payments made.

Currently, both employers and pension providers make tax and nationalinsurance payments for employees to HMRC and report them to the tax office oncea year. Annually reporting those figures can result in under-payments andover-payments of tax.