Assessments, appeals and other procedures: coding objections and appeals
PAYE is a provisional system of deducting tax from employment income such as wages and salaries by the use of code numbers and tax tables. Where PAYE does not get things right in the tax year matters are sorted out at the year-end either by informal calculation or assessment (see EIM71405).
Because PAYE is a provisional system it makes sense to deal with taxpayer enquiries about code numbers as informally as possible. That is why the PAYE regulations give taxpayers initial rights to object to code numbers. If HMRC does not amend code numbers following objections, taxpayers can then appeal. The First-tier Tribunal can consider all matters relevant to a code number and determine what the code number should be. The First-tier Tribunal’s decision is final, except on a point of law. Most problems are sorted out at the objection stage, and only a very small number of cases go to the First-tier Tribunal in any tax year.
Where HMRC has notified an employer of a code number, the employer has to use that code number when operating PAYE, even though at that time the coding may be subject to an open objection or appeal.