Advice: Tax Underpayment

DarkConvict

Hi,

Im a regular poster here recently and i am very careful with money but something has gone amiss. Not sure if you can advise further on this, i put it in the debt forums already.

The story is i got my first job, which was my university placement (miles away down in london) and outside of tax on bank interest this has really been my first experience of seeing income tax. Anyway, that finished after 12 months as expected and i quizzed the tax office as usually you have an overpayment of tax if you finish part way into a new financial year.

However this was not the case, i have since my father passed away received part of his pension, about £4k a year whilst i continue to study in higher education, this pension already had a tax free allowance of 603L. Which has been fine for several years, however on getting my new job my employer also put me on a tax code of 603L which i thought was fine as that is my tax code and tax was coming out of my salary an amount the same as the other placement student. But little was i aware this is not the case and i have been landed with a £970 bill due to not paying tax on £6030 of my salary as it actually meant i had 2 tax free allowences. I've read up about tax today and i have worked out the numbers and they are all correct, i have underpaid tax.

So a call to national debtline, to the tax office, back to national debtline (and tomorrow to tax aid). I have worked out the following, the tax office has told me that i do owe tax and must pay it, fair dos. But they also told me they didn't give my employer the 603L code, but instead a BR code as only 1 tax code is issued. As such i should actually have been taxed too much for the first part of my placement, year 08/09.

Does anyone know if i have a case against my ex-employer for incorrectly taxing me, as now i am not at work due to been a university full-time on my final year project my monthly income is rather limited to actually pay this off, now i need to deal with this due to there previous mistake.

A bit long, but tax is never simple. Thanks for reading if you made it this far.

fengirl_2

If HMRC issued code BR to your employer and they failed to operate this code, the usual thing would be that HMRC would ask the employer why they did not operate the correct code. If the employer was found to have been lax in their PAYE operation, then the employer would normally be liable for the tax - but this is something which HMRC would make a ruling on, its not something you can deal with your ex employer on. The other question is did you receive the code BR? If not, then there is a case for the employer paying the tax - but you need to bring this up with HMRC.
Surely they are not asking you to pay this tax in one lump sum - they will collect it through your PAYE code number?

DarkConvict

Hi Fengirl, thanks for the reply.

I didn't receive any information regarding to my tax, i have kept all i letters related to work and i didn't have anything from HMRC. All i was given was my first payslip, a P60 in April 09 and a P45 in July 09. The tax code of 603L is on my payslip + P60, and L647 on the P45 for this year 09/10, but i never received anything from HMRC.

So far the HRMC has not asked me to pay it back aside from over the phone when i rang to say i had to pay the tax due, they did say to put it in writing to the Wales head office in ruxtem for a hardship case, however there was nothing in the letter about what to do next, it was just a tax calculation letter.

For me, the best way would be to collect via PAYE on the pension over the next 9-12 months at roughly £100 pcm.

How would i go about seeing/proving if my employer had definitely made a mistake, as i received no paperwork from the HMRC, all i know is they told me yesterday that Logica weren't given the 603L code by the tax office so shouldn't have used it.

fengirl_2

You need to take up the point about your employer failing to operate code BR with HMRC - who will then investigate the matter with the employer. However, the fact that you did not receive a code BR from HMRC makes me doubt whether this code was ever issued. I wonder if HMRC were expecting you to have signed a P46 saying that you were in receipt of a pension which would have been an indication to Logica to operate BR. If you signed a P46 to say this (Logica) was your only source of income, then they were correct to operate code 603L. You need to ask HMRC these questions.

DarkConvict

The question of a P46 has come up in my last phone call, and i do remember signing one, unlike most who handed in P45's, what i put on it over 12 months ago is not something i can remember, but if they said is this your only source of income i would have put down no, as i was aware of the pension income. The problem comes is if my employer advised the wording to that question as do you have another job rather than another source of income + this job. I've spoken to the tax office of my ex-employer and they have advised to contact ACAS, ACAS has said it is a tax matter and they cannot deal with it, even if the P46 was processed incorrectly its directly employee/employer problems so back to the Tax Office.

With regards to payment, i was told if no demand is sent it will be added to next years tax and a tax code adjustment will take it out over 12 months via PAYE on the pension income.

I am going to chase the North East Metro Tax office, to see if they can find and/or send me a copy of my P46, if not ill chase my employer for the form, in absence of anyone finding it i will just have to pay out. In my poor knowledge that you are only meant to have 1 tax code, not the same one across all income is my downfall here.