Wrong tax code - paid too little tax, my liability??

helpme08 · 11 August 2008 at 12:26AM

Hi,

I started a new job in 2006, and it appears my employer forgot to file my P45 or P46, as such I have remained on a BR (basic rate) tax code for the last 2.5 years (without realising it). As I earn over the higher rate threshold, I thus have a outstanding tax liability - more than I have in liquid assets. Is my employer responsible for this? Can I claim the tax back off them as it was their mistake? If not, how can I deal with HMRC as I don't have this cash available to repay immediately.

Thanks.

jimmo · 11 August 2008 at 1:32AM

Wow!
As a generalisation, for us lesser mortals who only dream of being liable to HR tax, code BR would be a financial disaster. We would be paying so much excess tax that we couldn’t afford to live.
To be frank, if you think that tax on code BR means that you have been underpaying tax since 2006 you are a complete tax idiot but your ability to earn means that you can afford to be such an idiot.
Pay somebody to sort this out for you but don’t blame your employer.

helpme08 · 11 August 2008 at 12:06PM

Hi Jimmo,

Thanks for your time, yes - you might think I am a bit of an idiot(!) however, I'm not sure I am at fault. The Adjudicator's Office ruled against the employer in a similar case in 2004 (http://www.adjudicatorsoffice.gov.uk/publications.htm, p21 "Whose failure?"). Does anyone else have a perspective on this?

Thanks

dzug1 · 11 August 2008 at 12:25PM

helpme08 wrote: »

Hi,

I started a new job in 2006, and it appears my employer forgot to file my P45 or P46, as such I have remained on a BR (basic rate) tax code for the last 2.5 years (without realising it). As I earn over the higher rate threshold, I thus have a outstanding tax liability - more than I have in liquid assets. Is my employer responsible for this? Can I claim the tax back off them as it was their mistake? If not, how can I deal with HMRC as I don't have this cash available to repay immediately.

Thanks.

If you have been on a basic rate tax code you MAY not owe any tax. You won't have had the benefit of your personal allowance which means you will have overpaid tax on part of your income - possibly sufficiently to cover any higher rate tax due, possibly not, depending how far over the threshold you awere.

And no you can't claim it from your employer - the Inland Revenue can do that if they see fit rather than pursue you for it. The example you quote seems to indicate that that should be the case.

CLAPTON · 11 August 2008 at 12:29PM

do you have any saving interest?.. if so did you declare those to the HMRC?

helpme08 · 11 August 2008 at 12:50PM

Thanks Dzug1 - I am quite far over the threshold, so will have a significant underpayment. Do you think the best way is to contest this with HMRC or my employer first then?

Clapton - I had taxed savings interest income of about £300 in each year. Now you mention it, my income in each year was over 100k (as on my P60, all from same employer but due to bonus still taxed on PAYE), and so I should have completed a self assessment form in the first year (i am still within the filing deadline for the second year). Do you think this affects my situation?

CLAPTON · 11 August 2008 at 12:56PM

and did you declare them to the HMRC as you are a higher rate payer

helpme08 · 11 August 2008 at 4:06PM

no, sorry, i should correct the former statement - i earned below 100k for 07, and so didn't complete a self assessment. i haven't sent anything to hmrc yet for 08.

jimmo · 12 August 2008 at 1:44AM

Hi, Helpme08,
I had a look at your link to the Adjudicator’s Office and that was quite interesting.
Basically, the employer had failed to operate the PAYE system properly by failing to submit a form P46.
In your case the trouble is that if your employer did submit a P46 (after you had failed to certify that this was your only or main job) then your employer will have done nothing wrong and HMRC will come after you for any money owed.
I just think that if you have been so dumb to allow this situation to develop then you are not the best person to sort it out.
The taxman in me says that (from the Adjudicator’s report) Mr K’s agent did some brilliant work in finding a tiny little loophole which saved Mr K a huge tax bill.
Now you cannot go to the Adjudicator’s Office and say “I’m in exactly the same situation as Mr K.”
Mr K’s employer actually got it wrong but I seriously doubt that you, on your own, would be able to establish that your employer got it wrong.
Mr K had an agent and won. What the Adjudicator’s Report does not say is whether HMRC then went after his employer for the Tax lost.
So, if you believe that you have a substantial tax liability, HMRC is going to chase you or your employer for that tax.
How safe is your job if you put your employer under the spotlight?
When we come down to basics I really think you have been stupid to get yourself into this situation and what you do next possibly means you will have to pay a lot of tax but if you are successful in shifting the blame to your employer how long do you expect to keep your job?
I really think you need professional advice.

helpme09 · 8 January 2009 at 3:24PM

helpme08 wrote: »

Hi,

I started a new job in 2006, and it appears my employer forgot to file my P45 or P46, as such I have remained on a BR (basic rate) tax code for the last 2.5 years (without realising it). As I earn over the higher rate threshold, I thus have a outstanding tax liability - more than I have in liquid assets. Is my employer responsible for this? Can I claim the tax back off them as it was their mistake? If not, how can I deal with HMRC as I don't have this cash available to repay immediately.

Thanks.

Did you have to repay the tax ? Did your employer help you ?

helpme09 · 8 January 2009 at 3:25PM

Did you resolve this ? Did you employer help or did you have to repay the taxes ?

Wrong tax code - paid too little tax, my liability??

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