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Wednesday, 12 October 2011

Have they changed your Tax Code?

Many of our clients have been calling, confused by these letters. Whether you've had a letter or not, we recommend you read the following as it could affect you later.

If you are at all concerned, call us.



Many tradesmen (to our knowledge predominantly scaffolders although no doubt other tradesmen will be affected) have received letters from HMRC informing them that their tax code has changed to reflect the expenses they incur. Clearly this sounds great initially as your pay packet will suddenly increase , however it is fraught with problems further down the road (explained in more detail below) – it can be stopped and if done quickly enough it will not end up in a debt situation for you (and most interestingly if the debt is £300 or less, the guidance for HMRC internally is that they write it off), please read the following in order to understand why this new move from HMRC is not good for you.

This change in PAYE tax code is supposed to reflect the fact that expenses have and are continuosly being incurred in your profession.
However the massive oversight is that HMRC have decided that this level of expense will remain a constant, and yet you all know that it will not.
Now I’m not casting aspersions, I’d like to think that HMRC may well have done this for all the right reasons and had not at all envisaged that it will create major problems and probably much hardship for you and your family further down the road, however their debt collection, fines and interest charging regime is quite draconian and un-bending, and call me cynical but it looks like a way to punish those working men that had the audacity to claim their rightful expenses and whose future potential problems (due to this measure) will act as a deterrent to any others thinking that they had at least equal rights as men to the expense loving MP’s, the heavily pensioned Public Servants and the expense claiming, lavish lifestyle representatives we have working for “us” in Europe all paid for and expensed by our tax pounds.

Here are the constants
and effectively why this new change can never be accurate let alone work in your favour: -
The classic record of a scaffolder over a 3 year period is that
• he will work for at least two employers and as many as six,
• he will be based at a minimum of two sites and as many as 15
• the expenses he will incur can and almost always will differ greatly
• He will sometimes be able to take advantage of a company vehicle or the wagon and yet other times may/will be required to use his own vehicle
• the distances involved will vary dramatically and ultimately again the expenses associated will also differ greatly from year to year.

Ultimately this means that It is highly likely that there will be the wrong amount of tax paid come year end!

With this policy that HMRC are adopting (mainly down to a new piece of software they have acquired) the odds will now favour that there will be an underpayment by you... this means that HMRC will either adjust your tax code again to reflect the underpaid tax (thereby clawing it back in lumps every month and obviously reducing your pay packet ) or if it is over £2000, their own rules will dictate that they demand the debt to be paid straightaway.
It is worth noting that if it is not paid then under the HMRC system you will be marked down as a ‘Wont Pay’ and automatic fines will be charged, to add insult to injury HMRC will then charge interest on the total. They then hand the debt into the hands of the HMRC appointed debt collectors who have the power to turn up between “sunrise & sunset” demand immediate payment or they can distrain any and all your possessions (including your vehicle) the only thing they cannot seize are the tools of your trade.

If you are a client of ours, we can stop HMRC doing this if you want us to, but we need instruction from you i.e. a phone call 01280 821020, email or a PM.


At the end of the year we will help you calculate your correct expenses and claim your overpaid tax for you, thereby ensuring that you are not trundling unknowingly towards a debt that is wholly the making of HMRC and it’s ‘cute’ practice.