About to be Bankrupted by HM Revenue

Prometheous

Hi newb here and hopefully putting this query in the right section, well it is about employment and tax!

Situation,
Basically I have received a letter in the last couple of days that confirms that I will have to pay back the Inland Revenue £1700 of tax that they say wasn't deducted from my earnings.
I am (with my partner) just scrapping by fighting to pay bills and debt etc as it is and cannot afford the extra tax deductions.

History,
Me and my partner both work full time, wages arn't great and we have debts (loans & cards etc) that we are paying back, to this end I trained as a driver to seek a second job to work around my main one and boost our income.
I signed up to an agency (Paramount Recruitment) in August '08 and it was made clear to me that I would be an employee under the PAYE system and that their staff deal with the wages and tax etc. I worked with them until January '10 when due to changes in my main job hours it became too difficult to do both.
Obviously this loss of extra income put us back in a poor siuation, so I approached Citizens Advice for help in mid 2010, they came up with advice that just prevents us having to go for an IVA etc, but we have no money left over per month.

In September '10 I recieved notification from the Inland Revenue that I owe them £1700 because I wasn't taxed properly in that second job with Paramount and that I am liable to pay it all back.
I went to the CAB again on grounds that I thought that this request was unfair on me, and that we simply can't afford to pay it.
They basically agreed on both counts and offered to help, so I gave them all wageslips and associated paperwork from that job. It transpired that I hadn't had tax & NI deducted for many weeks, but had on others.
CAB wrote to the Inland Revenue on my behalf in October '10, I hadn't heard any response to this and tried contacting the CAB on countless occasions to see what was happening. This was extremely difficult and it was only about six weeks ago when I made contact with them again and they said that they hadn't heard back from the revenue, despite 3-4 attempts to contact them.

I finally received a letter directly from the Revenue on March 4th '11 stating that it is still my fault that I wasn't paying tax properly and that I am still liable for it, and could I notify the CAB of this!

Questions,
Is this really my fault? I signed up to work for a company as an employer, as employees they looked after my wages and PAYE info, are they not liable at all?
Shouldn't the Inland revenue have picked up tax discrepencies earlier and either notified myself or my employers?
And, what the hell should I do about paying the extra £141 a month which is deducted unquestioanably at source and will put us both into huge finacial trouble?

I have always tried to do things properly and by the book, I have always had jobs whereby I'm an employee on the PAYE system rather than go self-employed and use Self Assessment, and I'm amazed and shocked that I can end up in such an appalling predicament as this.

Thanks for your time in reading this and looking forward to responses.

MrRedundant

Afraid you can complain to your ex employer but if you owe the tax you owe it and your liable for it. Too many employees think they dont have to check their tax affairs. I am guessing you got your AE twice rather than 2nd job fully at 20%.

I'd negotiate with HMRC rather than fighting them to repay it over a period of time.

bendix

At the end of the day it doesn't matter who's fault it is. You haven't paid the appropriate tax on your earnings, and you're liable to repay them. You've received extra income as a result.

You just need to negotiate an appropriate repayment schedule.

I dont know where you get the idea you are about to be made bankrupt by HMRC. There is nothing in your post to suggest this is going to happen.

Any

Sorry, but too many employees think that it is employer's problem to sort out employee's tax affairs to the dot and it is simply not true. Employer can sort out your tax only as far as they have all the info about you - every individual is different and they are not mind readers.

However there are certain things employer's should do and that is to give employee without P45 a form P46 to complete... And if they don't employee should ask for it.

I do believe that children at school should be taught at least the basics of their own tax affairs. It is not rocket science - there is basic tax code, made out of personal allowance PER PERSON not a job, and circumstances can affect it (such as second job and repayment of owed tax, all sorts). Ignorance is not an excuse.

Unfortunately you haven't paid the tax and there is no way of avoiding it. I would call them and try to negotiate repayment schedule.

Jowo_2

There is a 'cutting tax' forum on MSE so hopefully there are posters there with expert knowledge of the tax system/HMRC and how to either challenge it on legimate grounds or negotiate a repayment schedule. If the tax is owed, the fact that you were ignorant about it and can't afford to pay it now is irrelevant - it won't go away because you consider it unfair (which it is, I'm not disputing the sloppiness of the agency btw).

As for your debt issues, go to the Debt Free wanabee board and post a statement of affairs (SOA) - the posters there will let you know how to do this and they can advise you on a better strategy to manage and sort out your debts. I know you consulted CAB but that was a while ago and your circumstances have changed.

DCFC79

I dont think you will be made bankrupt, you will have to agree with some kind of payment plan

JCS1

DCFC79 wrote: »

I dont think you will be made bankrupt, you will have to agree with some kind of payment plan

HMRC do get to a point where they make the person bankrupt as a way of closing their file. But this would be a long way off for the OP, as they would look to recover with a payment plan, via tax code etc, first.

gozaimasu

My understanding from the OP is that they have no money left over each money to agree to a repayment plan with HMRC and therefore would have to declare themselves bankrupt.

One thing you should do is complain to Paramount Recruitment and also report them to the REC for negligence (assuming they are an REC member governed by the agency regulations) etc.

You probably won't get any money out of it (as everyone else on the thread has stated that only you are liable for the tax regardless of whose fault the error was) but at least you can feel better about the situation by making sure those responsible face some sort of consequences for what they did.

dori2o

As the underpayment is less than £2k HMRC will in the first instance look to collect it via the tax code, so no need for a repayment plan.

OP, you need to contact HMRC and agree to spread this amount over 3 years. This will be done by applying a restriction to your tax code for the next 3 tax years.

£1700 over 3 years equates to approx £566 per year or £47 per month.

Unfortunately if you do not contact HMRC they will in the first instance try to recover this amount all in one year, so please contact them to discuss this asap as we are now approx 4 weeks from the start of the new tax year.

alyth

never ever rely on your employers - it had been at the back of my mind for a while that my tax code was wrong I've been in my current employment for 9 months now. Rang HMRC today, it turns out that my previous employer hadn't given HMRC the correct tax code. On the plus side I am now going to get a rebate of £1300!

having contacted a couple of friends who still work for the small shop that was the previous employer, they're still being taxed on a BR code but because they are working less than 20 hours they shouldn't be paying tax at all. Previous employer seems to have put everyone on the BR code working on the assumption that few of us would actually check.

So never ever rely on an employer to ensure you tax code is right - it worked out in mine and the other two employees' favour but as you found out unfortunately, it can work in the reverse. A lesson to be learnt.

Prometheous

Many thanks for reading my post and for all your advice.

I guess the basic point here is that I had made a massive wrong assumption in that the employers sort the tax out for you.
I have had several jobs in the 26 years that I have been working and three occasions now when I have had two jobs, but I have never encountered a tax reclaim or rebate for that matter. I assumed that if the employer had you on the books with a P45 and on the PAYE scheme everthing would be done correctly.

When I mentioned bankruptcy gozaimasu was correct in understanding what I meant, ie I don't really have the funds to pay the extra tax, or more realistically I would pay the tax by default but then couldn't pay my other debts. Perhas that word is abit strong and I realise there might be IVA choices.

Some massive lessons learnt - without a doubt.

I will re-contact the tax office and try and negotiate a spread payment scheme, as dor2o suggests, I'm also considering cancelling some monthly outgoings and possibly consider selling the second car which I use for work, but that will present big difficulties in itself.

I will also try and lodge a comlaint with Paramount, CAB seemed reasonably confident that there was grounds to try and recover the money from them, but not sure how they reached that conclusion. I was treated badly by Paramount in the end with different issues so it might not be a straight forward path.

Also thanks to pointers to look and post in other forums, I will do that as time allows!

It has to be said that CAB have been terrible to deal with on this, but I realise it isn't the staffs fault. After the intial meeting in October I couldn't get hold of them on the phone until January, have only spoken to my case worker once, and have been assured after phone calls that I would be phoned back, which I still haven't.
I should have been more pro-active nearer the beginning of the notice I suppose.