Tax blunder by HMRC - Underpayment of Tax

DonkeyDawn

In June 2008 I left Employer A. I was subsequently issued with a P45 in June 08 which I passed to my new employer (employer in July 2008. The information on my P45 was applied to my payroll information so my pay at the end of July 2008 from Employer B was correct.

At the end of July 2008 I received a payslip from Employer A, showing my share sales. These were completed after my P45 was issued and as it turns out has resulted in me underpaying tax in the tax year 08/09 by almost £3k. I never received an updated P45 and therefore had no information in which to pass on to Employer B and wrongly assumed that it would all be reconciled by HMRC given that Employer A and B submit all information electronically.

As it turns out Employer A actually gave HMRC the corrent P45 information at the end of July 08, which included the share sales. However, it was only in February 2011 that I was notified of an underpayment from way back in 08/09.

I have had several phone calls with HMRC and have tried to claim that HMRC are at fault (ESC A19) as they had all the information in July 2008 but failed to act on it within 12 months of the end of that tax year, which would have been April 2010. HMRC are saying that they are not at fault (even though the woman agreed that they did have all the information) and that I should've telephoned them in 2008 to tell them of the problem. As far as I was aware my tax was correct as I am taxed at source and I did everything I should've done and wasn't actually aware of the problem until February this year!

As the woman who did the first review under ESC A19 said that HMRC were not at fault then my case has now gone to a second review person.

Any advice greatly appreciated! Thanks

chrisbur

There may be special arrangements for share sales and the tax due on them, but if this is treated as a standard payment after the employee has left then, the normal procedure for a payment made after the P45 has been issued is for tax to be deducted at BR rate, the employee should be advised of the details, no amended P45 should be issued nor need the tax office be advised of the payment, the extra pay and tax are added to the end of year details which are sent to the tax office after the tax year ends.

Details on page 15 of http://www.hmrc.gov.uk/guidance/cwg2.pdf

If this procedure was followed then I would assume that the extra tax was because you were into the 40% tax band. It would also mean that the tax office would not know about the payment untill after the tax year 08/09 has finished so would have untill April 2011 to notify of underpayment.

DonkeyDawn

Thanks for your response. That explains a lot

Although HMRC say that the P45 information they received from employer A at the end of July 08 did actually include the share sales.

You are right in what you say about the tax - I did underpay because I am in the higher tax band but only basic rate tax was deducted on the share sales.

chrisbur

DonkeyDawn wrote: »

Thanks for your response. That explains a lot

Although HMRC say that the P45 information they received from employer A at the end of July 08 did actually include the share sales.

You are right in what you say about the tax - I did underpay because I am in the higher tax band but only basic rate tax was deducted on the share sales.

If the tax office are saying that they had the information July 08 then certainly worth a try.