Collection of debt via in-year PAYE code changes ― points for agents to consider

Produced by Tolley
Collection of debt via in-year PAYE code changes ― points for agents to consider

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Collection of debt via in-year PAYE code changes ― points for agents to consider
  • HMRC debt collection procedure
  • Collection of debt via the PAYE code
  • Amount of other debts that can be collected via the PAYE tax code
  • Debt collection via in-year PAYE code changes
  • Potential problems for the taxpayer
  • What does the agent need to do?

HMRC changed its practice regarding the collection of self assessment debt via a taxpayer’s PAYE tax code with effect from March 2020. Up until that point, if any underpaid tax or other debt was to be collected via the PAYE code, this was effected from the following 6 April, meaning the taxpayer had sufficient notice of the change.

From March 2020 onwards, HMRC can begin collecting the debt straightaway by amending the PAYE tax code for the current tax year. Unfortunately, by the time the taxpayer receives the amended coding notice through the post (if indeed they receive a copy through the post, see below), it may have been already applied and the taxpayer may have suffered a significant drop in net pay that may leave them unable to pay their bills.

Although this change was announced in Agent Update 76 in February 2020, this may have slipped the notice of some agents.

This guidance note summarises HMRC’s debt collection procedure, when unpaid tax or debts may be collected via the PAYE tax code and potential actions for the agent to take in relation to in-year coding of debt.

HMRC debt collection procedure

HMRC published a policy paper in August 2020 on how it deals with taxpayers who have a ‘tax debt’. There is no definition of ‘tax debt’, but it is assumed that any overdue amount could be considered a ‘tax debt’.

Firstly, HMRC will attempt to contact the taxpayer by phone, post or text to encourage the taxpayer to contact HMRC to discuss the debt. However, this is fraught with problems. Taxpayers may dismiss a phone call or a text message as a phishing attempt. See the HMRC guidance on phishing attempts and genuine HMRC contact attempts.

If the taxpayer does not contact HMRC after this initial attempt, the policy paper says that HMRC will visit the taxpayer at their home or business address. There is no indication in the policy paper that the taxpayer needs to have a

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