Getting employer to accept liability for underpaid tax

lizziebroom

Hi all

Like many of you may have, I received a notification yesterday that I've underpaid tax in the 2007/8 tax year by about £500. (nice - it's my birthday today, talk about timing!)

I've had a look at this, phoned HMRC to discuss it and they're sending me a breakdown of the figures. Basically in that year I started working for my employer on a temporary contract so was being paid by a recruitment agency, and then became permenent in the October. I think the problem is that my employer (perm one) put me on the wrong tax code, which meant I was working from 0 when I started being paid directly by them in October, meaning I had two lots of personal allowance accounted for. What then happened is that for some reason, they claimed a rebate for me on my behalf, which I received at the end of the year. And now they're asking for this money back - understandably.

The documentation HMRC sent me said that if you believe your employer has made a mistake, it's possible to try and get them to accept liability for this so they pick up the bill. I really want to try and do this because it's not my fault - I have provided all the paperwork they should have needed to get me on the right tax code, and I think they have a duty to get this right for employees. Besides, I was working for them on a temporary contract before I started permanently so why they have started me again in October is a mystery to me, when they knew I was already working before that so would have already been paying tax.

I was wondering if anyone had any advice on this, or if anyone's had any success or failures in this area? Obviously I would really like to avoid paying this £500 myself - I am just about to try and buy my first flat so that money will make all the difference. But clearly it's close to the end of the tax year, and I'm not sure whether it's very likely that I'll get anywhere.

What do you think? Thanks!

NiceGuyEddie_2

What did you do to ensure that your tax was correct? We need to know this before anyone can assess whether your employer is liable.

CLAPTON

did you give your employer a P45 form the agency ?
do you have a copy of the P45?

in general employers put you on a tax code when you first start based either on your P45 if available or on an emergency code until the HMRC tell them the correct code.
So the employer will only be at fault if they received a taxcode from the HMRC but didn't apply it.

System

When you became permanent did you then leave the agency or did you remain on their books but not take any more work from them.

If you remained on their books then they would not have given you a P45 and the permanent employer should have given you a P46 to complete and you would have been expected to tick box C indicating that the permanent job was your second job. Ticking that box would have told the new employer to operate a BR code until they got further instruction from HMRC

If the agency did cease your employment with them they should have given you a P45 with your pay and tax details up to the date you stop being their employee. You would then have been expected to give parts 2 and 3 of the P45 to the new permanent employer and they should have used the figure from the P45 to work out what tax code to use until they got instruction from HMRC.

In order for HMRC to issue the correct tax code they should either have received a P46 or part 3 of a P45 from the new permanent employer or a phone call from you advising them of your change in employment.

lizziebroom

Thanks all - I think when I became perm I filled in a P46, so they should have got the right code. What is confusing me is that when I phoned HMRC yesterday, they said that they didn't issue any codes in the tax year 2007/8 for me. So does that mean it's all down to my employer? I don't quite understand how the system works. Obviously as well I am happy to pay back tax when I've underpaid, but the fact seems to be that my employer applied for this rebate which I received wrongly, and it's finally being reconciled 3 years later.

dori2o

lizziebroom wrote: »

Thanks all - I think when I became perm I filled in a P46, so they should have got the right code. What is confusing me is that when I phoned HMRC yesterday, they said that they didn't issue any codes in the tax year 2007/8 for me. So does that mean it's all down to my employer? I don't quite understand how the system works. Obviously as well I am happy to pay back tax when I've underpaid, but the fact seems to be that my employer applied for this rebate which I received wrongly, and it's finally being reconciled 3 years later.

I would be asking the employer if they had retained a copy of the P46. It could explain why they have used the wrong code if you had completed the form incorrectly, i.e. ticked the box that says this is you only job since last 6th April. In which case the employer was correct to operate the code on a cumulative basis. If you ticked to say this was your only job, but not since last 6Th April, then the employer is at fault as they should have operated the code on a wk1/month1 basis and have not.

If the employer has not retained a copy of the P46, ask HMRC if they have a note of what box was ticked on the records.

CLAPTON

what exactly do you mean that they applied for a rebate for you?
and how exactly did you receive it ... as a cheque or simply via a change in your tax code?
if they contacted the HMRC to arrange a rebate then how can the HMRC say they didn't issue a taxcode for you


do you have the payslips for this period and the P45 and the P60
what exactly do they have for your tax code?

System

lizziebroom wrote: »

Thanks all - I think when I became perm I filled in a P46, so they should have got the right code. What is confusing me is that when I phoned HMRC yesterday, they said that they didn't issue any codes in the tax year 2007/8 for me. So does that mean it's all down to my employer? I don't quite understand how the system works. Obviously as well I am happy to pay back tax when I've underpaid, but the fact seems to be that my employer applied for this rebate which I received wrongly, and it's finally being reconciled 3 years later.

That means they didn't receive a P45 or P46 or phonecall from you to prompt them to issue a tax code.

dori2o

Pam17 wrote: »

That means they didn't receive a P45 or P46 or phonecall from you to prompt them to issue a tax code.

They may have received a P45/P46 as these do not trigger a coding issue.

Also the P45/P46 has a section for the new employer to indicate the code currently being operated. If the employer has completed this section and HMRC believe the code in operation to be correct, there is no need to reissue the code.

lizziebroom

hi all, just wanted to say that after a long battle I have finally had success and HMRC have admitted I don't need to pay it back under the extra statutory concession A19.

(annoyingly it won't let me post the link to the page on this site but just search for a19)

So anyone else who's in the same position, stick to your guns, write them an explanatory letter and keep chasing! Sometimes things do pay off

DANHEL

Hi all, I recently received a bill from HMRC for underpaid tax relating to benefits from my previous employer for years ending April 2010 and 2011.

I have found out that my employer gave HMRC an incorrect tax code which did not include these benefits and hence the tax was not applied on monthly PAYE.

I have two questions:
1. Is the employer legally bound to explain tax benefits and offer me alternatives
2. If error was down to employer are they liable for part/all of the tax owed to HMRC?

Thanks for any feedback and thoughts