Businesses in the East Midlands are being alerted to new rules which as from April will allow small debts of up to £3,000 to be collected though taxpayers’ PAYE codes.
Under the regulations HM Revenue and Customs will be permitted to use PAYE as an additional way of recovering self-assessment debts and tax credit overpayments.
Dave Barnett (pictured), partner in Mountsorrel-based Charnwood Accountants and Business Advisers LLP, said HMRC began sending out letters last summer to selected self-assessment taxpayers with outstanding debts, before turning its attention to tax credit claimants with overpayments due for direct recovery.
He added: “The letters notify recipients that the money owed can be collected through their pay by reducing their PAYE code.
“A statement of liability is enclosed, showing a summary of the debts, interest accrued to date and the daily interest accrual rate. Accrued interest will be dealt with separately and will not be collected through the tax code reduction.
“If the taxpayer doesn’t want to have his or her code reduced then that individual’s tax adviser should contact the Revenue to discuss payment by an alternative method. This is also the case if having the debt coded out would cause hardship.
“There is a priority order for including in a tax code sums owed so please talk to your advisor if you need clarification.”
HMRC has said that the safeguards which exist to prevent excessive deductions from salary via PAYE will also apply to the coding out of debts.