The big four accountancy firm KPMG is racing to resolve an embarrassing administrative mix-up which has left British-based employees being given erroneous information about their tax payments.

Sky News has learned that the professional services giant is close to resolving an issue which emerged last week, according to insiders.

The fiasco is understood to have arisen as a result of HM Revenue & Customs being provided with incorrect documentation by a third party following the simplification of the legal structure of KPMG companies.

Sources said UK employees' contracts had been transferred from KPMG UK Ltd to KPMG LLP on April 1 - a process which did not involve any changes to their terms and conditions.

However, a clerical error is understood to have resulted in the change being communicated to the tax authorities with effect from the 2023-24 tax year.

A source close to the firm insisted that the issue had not resulted in any incorrect payments being made to staff.

The mistake is said to have been separate to a payroll processing problem last week which meant that KPMG staff received their April salaries several hours later than scheduled.

ADP, its payroll services supplier, resolved the issue on Friday, according to KPMG.

A KPMG UK spokesperson said: "We are very sorry to our colleagues who were affected by this issue from our provider.

"We will ensure that none of our people will be left out of pocket as a result."