Underpayment taken in one go, where do I stand?

djwood1

Hello,

Here's a break down of what has happened and hopefully someone can help.

2007-2008 - Overpaid tax by £600
2008-2009 - Underpaid by £200
2009-2010 - Underpaid by £480

My outstanding amount from 2008-2009 was taken directly from the £600 I overpaid, resulting in a £400 cheque to me.

However, yesterday I noticed that Inland Revenue has also taken £480 directly from my wages. The outstanding amount is due because my company failed to tell IR that I use a company car and as a result I was set up on the wrong tax code.

IR state that the amount is normally taken in the next financial year over 12 months. They state that the new tax code my employer has used triggered the system to deduct the full amount and the only way in which it can be reversed is by my employer 're-running the pay?'

However my employer doesn't want to know and lie all the blame on the IR and state that a re-run in the pay won't stop me from being taxed heavily. IR state that it will and the outstanding amount will be taken from my salary in monthly installments from 2012.

I'm out of pocket by a considerable amount and don't know what to do. £500 down means that my rent and council tax doesn't get paid.

Can anyone advise?

agrinnall

I'm no expert but I'm guessing that HMRC have issued a replacement tax code to enable the underpayment to be taken which should have been applied to the 2011-12 tax year (i.e. it should affect your first salary payment after April 6th) but that your employer has applied it to your last salary payment for 2010-11 so the whole lot has been taken in one go.

If the coding notice stated that it should apply after April 6th then your employer was in the wrong to apply it early. If it didn't say that then it's HMRC who made the mistake. Did you get a copy of the amended coding notice?

HMRC are probably right that the employer would have to rerun their payroll to correct it, if they can't do that then I think they should be making some sort of manual adjustment to repay you then take the money monthly over the next 12 months.

djwood1

Thanks for the help.

My previous payslip states a 647L code whilst this months payslip states a 432L code.

What's even more confusing are two letters which I received;

18.01.2011 - Your tax code for the year 6 April 2011 to 5 April 2012 is 532L

then...

06.03.2011 - Your tax code for the year 6 April 2010 to 5 Aptil 2011 is 432L, which replaces 323L?

As I was never on a 323L code what has happened? After speaking to the IR they now state that they have never issued a 647L code and that my employer has actioned it and most probably recognised their mistake and applied a cumulative code 432L which has taken the full amount.

I'm lost. IR blame my employer and tell me to take it up with them for applying the incorrect code and my employer state that it's not their fault, they only apply the codes which IR send.

On a side note, everytime I speak to someone at IR I get stupidly different answer. The last chap told me that even a re-run in pay won't solve the problem. Plus it takes 20mins on average to get connected.

Mikeyorks

djwood1 wrote: »

06.03.2011 - Your tax code for the year 6 April 2010 to 5 Aptil 2011 is 432L, which replaces 323L?

.

Are you sure there wasn't a 'month 1' following the Code? If HMRC issue a substantially different code late in the year it will usually have that after it. In order to prevent an excessive deduction in a short space of time :

http://www.hmrc.gov.uk/paye/intro/tax-codes.htm#3

djwood1

Thanks for your help but I didn't see any 'Month 1' codes in either this payslip or the previous 6 or so.

Is there anyone/where I can get some advice from? Will Citizens Advice be clued up on the inner workings of tax? I would normally swallow it, as I obviously owe it, but it couldn't have come in a worse month where my disposable income is less than <£200. A further £500 off will finish me!

Cheers

Mikeyorks

You misunderstand. Is the Month 1 on the P2 (Coding Notice) you say was issued 6th March?

djwood1

Ah I see, just checked, and nothing is mentioned. Thanks

Highway61

You have my sympathy as a similar thing happened to me a couple of years ago. I thought I had done everything right i.e. phoned up the tax office and told them that I was starting with a company car. Turned out that my employer failed to tell them. The big lesson learned is to always check your tax code. In my case it hadn't changed to take into account the car. I was furious but ultimately it was my fault for not checking my code. The company admitted that they were not blameless but there's not a lot that they can do. Maybe your employer might be able to help out by offering some kind of loan but I suspect that you are not alone in this and it could open the floodgates. You can be sure that you will always check your code from now on...once bitten and all that.

Incidentally, the tax office is one of my pet hates - you always get the feeling that you are doing their job for them. I've nothing against the individual members of staff because they are always pleasant but everything seems so antiquated.

Then when you phone them up to inform them of a change in circumstances you get at least 3 letters from them all arriving within days - how much is that costing the tax payer?

Mikeyorks

djwood1 wrote: »

Ah I see, just checked, and nothing is mentioned. Thanks

Sorry. I'd missed the fact that as far as HMRC were concerned they were increasing your Code (323 to 432). Therefore no need of the Month 1 as - as far as they were concerned - you would have been due a refund of close to £200.

sunshinetours

Am I missing something or are you now straight and you have effectively paid £80 in total to HMRC? (£400 receoved and now £480 deducted) Or are you disputing the actual figures deducted?

p00hsticks

sunshinetours wrote: »

Am I missing something or are you now straight and you have effectively paid £80 in total to HMRC? (£400 receoved and now £480 deducted) Or are you disputing the actual figures deducted?

I donlt think the OP's disputing that they owe the money, just whether it was correct for the entire £480 to be taken from a single months pay, rather than being spread over an entire year.