Tax underpayment due to BR code

helsuz

My husband has recently received two P800 notices from HMRC relating to the tax years 2008-9 and 2009-10 stating he has underpaid his tax for those years.

The reason stated for the underpayments in both notices is "the amount of medical expenses benefit included in your PAYE code was lower than the amount taxable". The medical expenses amount (stated in the notice itself) is £124 in 2008-09 and £249 in 2009-10. The underpaid tax amount for the 2 years in question is £1737 and £1948 respectively.

The reason given makes no sense to me, as if the reason is that his personal allowance didn't take account of the medical benefit, this would not result in such a high level of underpayment? It doesn't add up to me?

On review of my husband's payslips for the periods, I noticed he was on tax code BR. In fact, looking back further, it appears he has been on that tax code since the tax year 2006-07.

Having researched what BR means, I suspect that this is actually likely to be the reason for his underpayment and not the reason given by HMRC. This being because he is a higher rate tax payer, and the BR code means he was actually being charged basic rate on his earnings - if I have understood correctly the implications of this tax code.

I have 2 main questions:
1. If HMRC have given an incorrect explanation for the mistake, is this grounds for appeal against the notices, as they have given misleading information?
2. As my husband has been a higher rate tax payer, and has been on the BR code since 2006-07 is there grounds to appeal based on ESC A19? My understanding of ESC A19 is that if HMRC have failed to make use of information within 12 months of the tax year they received pertinent information, it is grounds for appeal? My reasoning being that they knew via his P60 for 2006-07 that he was a higher rate tax payer so by April 2008 they should have issued a new PAYE coding notice changing his tax code accordingly? So this should be grounds for appeal in relation to the 2008-09 and 2009-10 tax years being coded incorrectly?

Any help anyone can offer is much appreciated!

Gas_Powered_Toothbrush

1) No.
2) You can't use a P60 or P14 as information received for the purposes of ESCA19 - he'd have had to tell them himself. The 06/07 P60 only confirms to them he was a higher rate taxpayer in 06/07.

helsuz

Thanks for this information, I appreciate it.

Do you have any ideas what circumstances might have lead to him being put on this code in the first place - he was put on it when he changed jobs in 2006, so is it likely to simply be an error by his new company? They then kept him on the wrong code for 3 years - does he have any rights to complain/ get any help from them if this is all due to an error on their part?

Naively, we assumed that as he has a single income and is on the PAYE system this meant that his tax obligations were fully covered, and foolishly (we now know) we never thought we had to check what his company had done...

Any

The most likely reason for him to be on BR tax code when he changed job would be because he did not hand his P45 in. Or his P45 said BR, are you sure he didn't have that tax code in the old job as well?

It can be mistake of the employer, someone might have not put the P45 through or did not question it, or did not change the tax code at new tax year, HOWEVER YOU AND ONLY YOU ARE RESPONSIBLE FOR YOUR TAX AFFAIRS.

The best payroll department in the world is not staffed with mind readers, tax code is affected by many different things, even by private matters (underpaid tax from past and repayment tax code applied for example).

So it is down to every person to have basic understanding of their tax affairs and question it with payroll dept or HMRC if they don't understand it.

One of the reasons I feel strongly about having basic understanding of tax lessons at school (it is not rocket science, basics take less then an hour to explain). Because ignorance is not an excuse and it does not cut it with HMRC.

If you owe a tax - you have to pay it.

MrsManda

helsuz wrote: »

Do you have any ideas what circumstances might have lead to him being put on this code in the first place - he was put on it when he changed jobs in 2006, so is it likely to simply be an error by his new company? They then kept him on the wrong code for 3 years - does he have any rights to complain/ get any help from them if this is all due to an error on their part?

It could be an error on the employers part but as Any said, it's more likely that he either didn't give a P45 when he started his new job or else his P45 didn't contain the right details.
It is up to the individual to check they are paying the correct tax. This is why you get a PAYE tax coding notice before the start of a new financial year. You are supposed to read the notice, make sure all your personal details are correct and if you think there is an error or you are unsure what it means you are meant to contact the HMRC and discuss it with them.
Your employer doesn't necessarily have all the information required to make a judgement as to whether the PAYE coding they've been given by the HMRC is correct.

helsuz

He did hand in his P45 and he didn't have that tax code in his previous job.

I take your points on board regarding responsibility for your own tax affairs, we have certainly learnt from this experience!

helsuz

MrsManda wrote: »

It could be an error on the employers part but as Any said, it's more likely that he either didn't give a P45 when he started his new job or else his P45 didn't contain the right details.
It is up to the individual to check they are paying the correct tax. This is why you get a PAYE tax coding notice before the start of a new financial year. You are supposed to read the notice, make sure all your personal details are correct and if you think there is an error or you are unsure what it means you are meant to contact the HMRC and discuss it with them.
Your employer doesn't necessarily have all the information required to make a judgement as to whether the PAYE coding they've been given by the HMRC is correct.

For some reason, he didn't actually receive any PAYE coding notices until 2010 which is when his tax code was amended and corrected.

MrsManda

Just a thought but does your husband have his coding notices from 2009/10 and 08/09? I ask because I am wondering whether they say anything about the medical insurance. It'd be useful to know, whether the medical insurance was taken into consideration at all during those years.

helsuz

MrsManda wrote: »

Just a thought but does your husband have his coding notices from 2009/10 and 08/09? I ask because I am wondering whether they say anything about the medical insurance. It'd be useful to know, whether the medical insurance was taken into consideration at all during those years.

He didn't receive any for those years, the first one he received was for the tax year 2010/11.

Looking at the Citizens Advice Bureau website it says that "not everyone gets a notice of coding each year. It depends on what allowances and reliefs you are claiming and whether these tend to change from year to year. If the only changes are the increase of allowances in the Budget or any change in the tax rates, your employer or pension provider will include these automatically in your wages or pension and you won't get a notice of coding."

Certainly I have only received a coding notice a couple of times in my working life, so the above makes sense. I presume his employers did not notify HMRC about the medical insurance in that time, hence no coding notice was supplied.

Any

helsuz wrote: »

He did hand in his P45 and he didn't have that tax code in his previous job.

In which case I would probably go in and demanded to know what the hell has the payroll department done with it.
It won't help you anyhow now, but at least employer will know they have incompetent staff and give them some training (if that hasn't been done since).

Has your OH not noticed that he is on BR and that it is different what he had before?

helsuz wrote: »

Looking at the Citizens Advice Bureau website it says that "not everyone gets a notice of coding each year. It depends on what allowances and reliefs you are claiming and whether these tend to change from year to year. If the only changes are the increase of allowances in the Budget or any change in the tax rates, your employer or pension provider will include these automatically in your wages or pension and you won't get a notice of coding."

Certainly I have only received a coding notice a couple of times in my working life, so the above makes sense. I presume his employers did not notify HMRC about the medical insurance in that time, hence no coding notice was supplied.

Yes, that is what happens. You only get notice when the circumstances change (ie new benefit applied/removed for example)

Medical benefit, as cars etc should however be reported on P11d form, of which employee MUST receive a copy every year... (this is the form from which HMRC finds out these benefits and their value for the tax year..)

Did your OH receive this?

System

helsuz wrote: »

He did hand in his P45 and he didn't have that tax code in his previous job.

I take your points on board regarding responsibility for your own tax affairs, we have certainly learnt from this experience!

Can you find your copy of the P45 (Part 1A) ?

That should tell you the tax code that was being used by his previous employer at the date of leaving.
His new employer should have applied that same tax code unless they were told that he had a 2nd job which would be one of the reasons they would apply a BR tax code.

I'm not sure if a P45 is one of the documents that HMRC accept as suitable documentation for ESC A19, others on here may be able to confirm this one way or the other ? I would guess not since individuals should really check that the new employer has applied the correct tax code on their first pay slip, that is why you get a copy of the P45