Underpayment of Income Tax - Who is to blame?

Jollyjak

Hi, just after some friendly advice over a bit of an upsetting Tax demand of £3200!
I left the Armed Forces after 23 years service in July 2008, but was still officially employed until Dec 2008 (they owed me an awful lot of untaken leave). I was lucky enough to find a good job which I started in October '08, and was consequently paid by both employers for a couple of months. I did not have a P45 on commencing my new job, so completed a P46, and ticked the box that I had another income (MOD wages, then subsequently a pension).
After a couple of terbulent months (paying BR tax in my new job), I handed in my P45 which I had just recieved, paid over £2500 in tax in Jan 2009, and the tax code on my new employment changed to 620L which was exactly the same as my previous MOD employment - all was well or so I thought!
I have recently recieved a bill from HMRC for £3200 for 09/09 and 09/10 as they have now realised that my tax code was not split between my new job and my MOD pension. I have a copy of all the relevant forms, and it transpires that my new employers (a large University), did not apply to HMRC for a new tax code and just put me on the same one that the MOD had me on. The correspondence from the MOD pension provider is sparse at best, although HMRC claim they have the information from them regarding the start of my pension.
I believe that I have given all the information required in the correct timeframe, and forwarded all forms to the elevant personnel as stated on the forms and that the mistake is between HMRC and my new employer.
I have written a letter to one of the two tax offices that are responsible for me, explaining the situation and enclosing the P46 (as instructed to do by the lady I spoke to at HMRC who said I had good grounds for appeal) and recieved no reply. Today I have recieved a letter demanding that I pay the sum by mid March, with no reference to any of the issues in my letter.
I telephoned today and spoke to a rather abrasive man for quite a long time who told me that 'it was my own fault for not ensuring I had paid the right amount' and that if I wanted to complain then put it in writing (already done, no reply).
I would be extremely grateful for any advice from the wise regarding this slightly stressful situation. Had I taken an acccountancy degree instead of serving my country, then perhaps I would have known how to keep HMRC happy!
Many thanks,
Worried!

dori2o

What tax code was in operation at the pension, and when did the pension start?

Do HMRC have a note confirming receipt of the P46 from your employer? Did HMRC issue any tax codes following receipt of the P46? Did they issue any tax codes to the pension provider?

When was the P45 issued to you from the MOD? Did the pension start out on a BR code also?

CynicalScotsman

It doesn't really matter who's fault fault it is. If there is an underpayment you will have to pay it back, unfortunately.

molerat

Very strange that your pension was not taxed at BR, Paymaster normally does unless told otherwise, what is the code on your pension statements ? It took me quite a lot of effort to get my tax code transferred to my pension.

MimiJane

CynicalScotsman wrote: »

It doesn't really matter who's fault fault it is. If there is an underpayment you will have to pay it back, unfortunately.

Not necessarily .... if you fight them and get the right advice/involve your MP. A couple of pensioners have "won" their fight and appeared in the Daily Mail from memory. Hard work and stressful though

Jollyjak

dori2o wrote: »

What tax code was in operation at the pension, and when did the pension start?

Do HMRC have a note confirming receipt of the P46 from your employer? Did HMRC issue any tax codes following receipt of the P46? Did they issue any tax codes to the pension provider?

When was the P45 issued to you from the MOD? Did the pension start out on a BR code also?

Dori2o, sorry for the delay in replying, I have been snowed under with stuff the last couple of days.

The pension started in January 2009, my final pay from the MOD was in Dec 08. The tax code on the pension P60 for the end of 08/09 was 603M1, changing to 647L at end of 09/10. My new job started in Oct 08, so I was paid by both employers for 2 months, on BR tax code with the Uni. In Jan 09 I paid tax of £2530 (70% of months wages, and the tax code for the Uni changed to 620L (the same as my previous employment.

I handed a P60 to my new employer, with the right boxes ticked, and following a call to Payroll a few weeks ago when i asked for a copy of the complete form, it is apparent that the second page has not been completed by the Uni, they told me that it is all done online, and that they wouldn't have sent it to HMRC.

In Jan 09 I recieved my P45, and handed the relevant parts to my new employer as required to do (final tax code 620L).

During my first call to HMRC following this demand, I was told by them that if I had completed the P46 correctly (which I had), and my employer had made a mistake then I would have good ground for appeal. I subsequently sent them the letter explaining all which appears to have been ignored as none of the questions have been addressed in their latest impersonal demand. D

During my most recent phone call, despite trying to explain that I had completed everything required of me correctly, and that I believed my employers had acted incoreectly by not requesting a tax code from HMRC, I was told that it was my fault because I should have checked / known what I should have paid.

I was also told that I had acted correctly in filling in a P46, but it was also my fault because I should not have subsequently handed in a P45 (despite the fact that both the form and my employers required me to do so).

I hope this explains why I believed that as I had done everything asked of me, paid a large lum sum in tax and recieved a new tax code (having been on BR then changing to 620L - I have NEVER had a BR code before in my MOD emplyment), that I should not be expected to pay for my employers mistakes.

I have also had a look around the HMRC manual, albeit very briefly whilst very tired, and my spirits were raised by the contents of PAYE 9501.

For everyone - please understand that I have been employed by the Government for 23 years, paying every penny of Tax that they requested, never questioning anything because I believed that my case was 'simple' and obviously could not be messed up. i am not trying to avoid paying what may well be due, but the fact that it is not my mistake and unless I had a very good understanding of the Tax system, then should I really be expected to stump up such a massive sum of money next month (which I do not have), with absolutely no investigation into the circumstances or cause?

I was also told that if I disagreed with their decision then I needed to complain in writing to them - I also thought that I had already done that, but they couldn't be bothered to reply. Do I have to put a 'THIS IS A COMPLAINT' header and footer on each page for them to treat it so?

I look forward to some informed replies and hopefully no derogatory posts from people who just want to be heard but actually have nothing valuable to say (not that there has been any yet, but I have detected quite a lot in other posts!!).

many thanks all!!!

dori2o

Unfortunately it looks like there would be no claim under ESC A19. HMRC do not seem to have done anything wrong. The pension provider have operated the emergency tax code on a week 1 basis, the notification that the pension started would not have been issued to HMRC until this first payment was issued. In the meantime you have handed in a P45 to you employer and over the year you have had the benefit of a tax free allowance of £6209. In the same year you have had 3 or 4 payments, which also give you 3/12, or 4/12 of your tax free allowance again.
To compound the problem, it seems that you may have also been given allowances at both sources for at least part of the 2009/10 tax year also, again resulting in an underpayment due to getting the benefit of too many tax free allowances.

In respect of the employer, I don't believe they are at fault either. You handed in a P46 where you declared you had another source of income (pension) and correctly they put you onto the BR tax code as per the instructions on the P46. You have then sent them a P45. As per the guidance for PAYE, assuming the P45 is less than 10 weeks old, they should update the payroll accordingly based on the P45 information.

I don't want to sound harsh, and appreciate it is mistake, but IMHO, and had you spoken to me on the phone, the advice I would have given is that unfortunately, HMRC is not at fault, your employer /pension provider is not at fault, and the amount due is payable.

The best advice I can give is to call and arrange a payment agreement as due to the size of the underpayment, it cannot be collected via your tax code. HMRC should however give you opportunity to pay the amount back over a 3 year period.

By all means if you disagree with my opinion, write to HMRC and head the letter 'Appeal/Complaint'

Jollyjak

Dori2o,

Thanks for your time, - you mention that the P45 should be less than 10 weeks old - is that 10 weeks from when I commenced employment, or 10 weeks from when I recieved it? I have dug out the relevant stuff, and it appears that the P46 was completed on 6 Oct 08 and the P45 was despatched to me from SPVA on 07 January 09 which is at least 13 weeks plus however long the post / me handing it in took (a week or so?).

One thing that is not clear to me is: should the university have applied to HMRC for a tax code for me when I joined? They had the information that I had another income and stuck me on BR for the first 3 months, only changing it after the P45 was given to them in mid January.

Looking at the copy of the P46 I have recieved back from payroll, they have 'double ticked' all the entries on the front of the form EXCEPT the Present Circumstances box C which I have ticked, the back of the form has not been touched at all. What should have happened when they recieved this?

Many thanks.

greytroot

Jollyjak - exact same as me and some other service leavers - it does appear that our pensions were not taxed properly - I am in position now where I have a bill (payable 28 Feb 11 in full) for £2502.50. Only have a part time job and my wee pension - will speak to the boffins at HRMC for payment plan and ask why they didn't highlight this in 08/09!:mad:

dori2o

Jollyjak wrote: »

Dori2o,

Thanks for your time, - you mention that the P45 should be less than 10 weeks old - is that 10 weeks from when I commenced employment, or 10 weeks from when I recieved it? I have dug out the relevant stuff, and it appears that the P46 was completed on 6 Oct 08 and the P45 was despatched to me from SPVA on 07 January 09 which is at least 13 weeks plus however long the post / me handing it in took (a week or so?).

The 10 weeks is from the leaving date on the P45.

One thing that is not clear to me is: should the university have applied to HMRC for a tax code for me when I joined? They had the information that I had another income and stuck me on BR for the first 3 months, only changing it after the P45 was given to them in mid January.
Based on what you said in your original post

'I did not have a P45 on commencing my new job, so completed a P46, and ticked the box that I had another income (MOD wages, then subsequently a pension).'

The University have done the right thing. The P46 is a self decleration. You informed the employer you did not have a P45 and had another source of taxable income.

Based on this they correctly operated the BR tax code. They will have sent the P46 to HMRC who will update the record to show a new source of income has started. However in this case as you have indicated another source of income, HMRC will not issue a revised code.

Looking at the copy of the P46 I have recieved back from payroll, they have 'double ticked' all the entries on the front of the form EXCEPT the Present Circumstances box C which I have ticked, the back of the form has not been touched at all. What should have happened when they recieved this?

as above, if you ticked box C, then they should put you on the basic rate tax code on a week 1 basis.

Many thanks.

What has happened is that the pension provider has put you on the emergency code on a week 1 basis. this gave you a tax free allowance every month that the pension was paid upto the end of the tax year.

You then handed in a P45 to your employer and they operated the information from this and gave you your tax free allowances.

Therefore for at least the last 3/4 months of the 2008/09 tax year you have received too many tax free allowances.

Jollyjak

Thanks so much for your time and the information, I was hoping that the silly questions would come to an end - HOWEVER!!

I have just got home from work to find a P2 with a new tax code from 6 Apr 2010 to 5 Apr 2011 as follows:

University: BR which replaces 409T
Pension: 68L which replaces 254L

It also says that it is for the whole year - will my employer and pension provider re-calculate what I have paid so far and adjust accordingly, or is it just for the remainder of this tax year?

They have obviously noticed an error somewhere as it says on the back that they have calculated an underpayment and I owe them £349.68 - is this in addition to the original amount?

Hopefully, I will soon be able to contact them? - is there a quick way to get through, and can I speak to my own Tax office(s) as I have been speaking to many different parts of the country so far!!! It says if you want to talk it through then please contact them - there is only the 'phone and listen to 15 different options' number!

Sorry for so many questions, but it is becoming more and more frustrating / confusing by the day!