proportion of lower earners’ income compared to that of higher earners. And higher earners also tend to have larger debts, which are less likely to qualify for coding out.
So coding out, one of HMRC’s most effective debt collection methods, is a tool that can work well for lower and middle income earners, but from which higher earners are often excluded.
For example, at present, if a debtor owes £2,995 and earns £25,000 per annum, HMRC can use coding out to collect the debt. But if a debtor owes £3,005 and earns £100,000 per annum, HMRC is not able to use coding out to collect the debt, and must instead use more expensive debt pursuit methods. This is inefficient and unfair. HMRC is therefore proposing to replace the current single scale by a graduated scale of limits. This would: protect those on lower incomes, with no change to the maximum that could be coded out for those earning less than £30,000; and introduce a graduated, income related scale for earnings of £30,000 or more so that a maximum of £17,000 could be coded out for a person with earnings of over £90,000. Additionally the consultation also looks at the extension of the statutory safeguard to prevent PAYE deductions exceeding 50 percent of individuals relevant pay and expanding its use across all tax codes and not just K codes as now. The CIPP Policy Team has prepared a survey to collect your views on this. The survey closes on 30 August and we would be very grateful if you could spare around 10 minutes to let us know what you think of these suggestions. Thank you very much.
CIPP response to consultation ‘How to improve HMRC’s collection of debt: coding out’
4 September 2013
The CIPP has today issued its response to HMRC’s consultation on improving debt collection through coding out.
Whilst in broad agreement with the proposal to introduce graduated limits for the amount of debt which can be collected through PAYE, respondents had concern for those on low incomes. There was also disquiet over the likely increase in the number of enquiries employers will receive as a result of these proposals, and respondents suggested that HMRC look to improve the explanations in letters it issues to individuals.
Members can read a summary of the survey results and the full consultation response issued to HMRC through the document below.
CIPP response to consultation on how to improve HMRC's collection of debt: coding out - September 2013
Government response to ‘How to improve HMRC’s collection of debt: coding out’
18 February 2014
Following consultation last year the government now plans to proceed with the debt collection elements of the proposed changes, and the extension of the 50 per cent overriding coding out limit to all tax codes.
The government has published their response to the consultation ‘How to improve HMRC’s collection of debt: coding out’.
CIPP Policy News Journal
16/04/2014, Page 257 of 519
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