As part of its drive to cut costs HMRC will stop issuing copy letters to tax agents of P2 PAYE coding notices, P800 tax calculations and a collection of Self Assessment notices.

“We hope that agents will understand our decision to withdraw these communications. We estimate… that we will save in the region of £1.25m by discontinuing the issue of agents’ copies of Forms P2 and P800 alone”

While withdrawing agent copies of some notices, HMRC will include a new statement on the letters advising taxpayers that the form should be shown to their agent or adviser. The notices affected include:

• P2  PAYE Coding Notices to be dropped from December 2010
• P800 Tax Calculation (August/September 2010)
• P810 targeted review form (already dropped in April)
• SA 250 advising tax payer of UTR and need to file a return and SA 251 Letter advising that tax returns will no longer need to be completed (both October 2010).
• SA 252 Letter for those who don’t submit a tax return but are liable to higher rate (September 2010, but already dropped since April).

The CIOT published the message on its website and immediately raised a series of concerns. While appreciating and supporting the need to cut government spending, the CIOT warned that the move was a false economy.

“This is a seriously short-sighted move from the Revenue,” said CIOT Deputy President Anthony Thomas. By keeping tax agents less well-informed about their clients’ tax obligations HMRC are likely to find they lose more money than they save.”

Calling on HMRC to reverse its stance, he added, “It is particularly disappointing that this change is being sprung on taxpayers and their agents with more or less immediate effect and without consultation.

“If they are set on proceeding, then much more effort will need to be put into telling all taxpayers about the changes. At the moment all that is planned is a message on letters from HMRC to taxpayers, but if the taxpayer doesn’t read letters obviously from HMRC (which is not uncommon, on the basis that they leave that to their agent) they will not see the message on the letter telling them to show it to their agent.

“Given that the vast majority of the costs involved in sending this information to agents come from paper, printing and postage, a consultation could also look at whether sending the information by email offers a possible cheaper alternative to sending it by post.”

The HMRC notice acknowledged “hard decisions and choices will inevitably have to be made” and indicated that it would continue to review the need for existing forms and look for ways to rationalise its printing and postage costs. The PAYE system, for example, will introduce a new process from December 2010 in which P2s will not go out until all 2010 SA Returns (for those meeting the 31/1/2011 online filing deadline) are captured. “This means that the code we issue will be based on the information in the return and will avoid the need for amendments had we issued the code earlier.”