This is nothing to do with boxing, although the issue of a code KO has floored me. K codes were introduced by HMRC to recover tax from income that was not being taxed in another way (such as benefits in kind), or there was an underpayment of income tax from a previous year.
The effect of a K code is to increase the taxable pay in a pay period, thereby recovering the additional tax due. All well and good. However this is not the end of the story otherwise this would be a very short and boring blog.
To my astonishment, I have this week seen a code that I didn’t think could exist…code K0.
This code is neither a K code nor a BR or 0T code. Thankfully our payroll software threw a hissy fit and spat out the code into an exception report.
A K0 cannot be processed. Why? Well, because it neither adds to taxable income (as originally designed), nor subtracts or deducted a specific rate (BR for example).
I then did what any upstanding member of the payroll community would do, waited 40 minutes for HMRC to answer my call to enable me to highlight the issue.
What did HMRC say?
“That’s not possible, no such code can be applied.”
Bingo, we have agreement with HMRC. Happily, and with good grace, HMRC amended the tax code.
So, a conclusion to this cautionary tale. If you are allocated a K0 code or find the payroll throwing out such a code, get onto HMRC without delay and ensure that the correct tax code is issued.
Good luck!
For more information contact Paul Chappell, Head of Legislation and Compliance on 03331 123456
