Tax Increase Nightmare - K401 Code

john180710

All - am new to this forum but hoping someone out there can help me. In a nutshell I've been hit with a ridiculous increase in tax since the start of the 2011 year, which means me paying an additional £430 per month (!) in tax when compared to the same time last year.

The story begins in March this year when I recieved a P800 statement saying that I had underpaid tax for the 2009/2010 tax year as I had not been taxed for for my company car and private healthcare (about £3.8k per year combined) for the 2009/2010 Tax Year which amounted to additional tax of £130 per month - my code went from 604L to 187L. My pay from Jan 11 onwards reflected this. I was not happy but accepted this.

Then I was told a couple of weeks ago by my company that they had recieved another instruction from the tax office to change my code to K401, effective start of April. Using my own maths I worked out this equated to about another £300 per month on top of the £130 extra I was already paying - so an increase of £430 combined. Needless to say I was not impressed. I got copies of the P11D's sent by my company to the tax office for the last 4 years - all were correctly filled out and showed the BIK clearly for my car and healthcare.

I then called the tax office this morning to ask why they had not informed me of the further tax increase and to explain how they had come to that figure (circa £5k of tax owed in 1 year!). After some heated exchanges, they informed me that since April 2009 the BIK I had been recieving had not been recognised and the BIK for the 2009/2010 and 2010/2011 years was now being recovered in the 2011/2012 tax year, on top of the the BIK I am getting in the 2011/2012 tax year. However by my quick sums this still does not add up to £430 per month.

I asked why they had not starting taxing me for my BIK for the 2009/2010 tax year in the 2010/2011 tax year (i.e. the next year, by their own rules) - they stated that they don't start taking tax until the start of next tax year - i.e. the 2011/2012 tax year (my first P11D was sent in July 2009). It just seems totally ridiculous to me that they can be so incompetent to leave it so long and then hit someone with such a huge tax bill, and expect them to lump it in one year.

My understanding is that any BIK you recieve in a tax year is actually collected in the next tax year -can someone please confirm this for me? I can't understand why they are saying they are collecting 3 years worth of BIK from me - as they would have to be collecting BIK for the 2011/2012 tax year now - when by their own rules they should be collecting it in the 2012/2013 tax year.

Sorry for the length of this story but I felt it was important to explain it fully in the hope that someone can help me fight back against the tax man!

Thanks in advance.

John

CLAPTON

maybe give the full facts tax year by tax year

-from the tax year you started receiving BIK
gross salary
value of BIK
tax code at tax year end

Jox

This happened to my boss and our accountants told me that HMRC haven’t given him a personal allowance on the basis that they have said that his income is over £100k but this is incorrect and it isn’t over £100k.

HMRC have also said that he was given employer benefits of £800 and this figure is not shown as taxable benefits on 2009/10 P11D, but they were incurred wholly for business purposes.

Our accountants have called HMRC to rectify these errors - but how did they happen??

antrobus

CLAPTON wrote: »

maybe give the full facts tax year by tax year

-from the tax year you started receiving BIK
gross salary
value of BIK
tax code at tax year end

Yes. Answers to these questions would be most helpful.

john180710

CLAPTON - thanks for the reply. Am in the process of getting all the P60's for the least 4 years, when I have this info I'll post it.

Jox - I agree, It's worrying that they could make such fundamental errors. One of my colleagues had an issue where they were doubling up his salary, for no apparent reason!

BoGoF

To answer some of your original points

No it is not normal to collect tax on the BIK the following year, not sure exactly what you mean but it is taxable in the year received.

Surely you must have been aware that you weren't being taxed on your company car etc, you get the P11d as well at the end of the tax year so is there not a charge of 'incompetence' on your part as well?

Sorry if that sounds harsh but surely you must have expected your tax to increased when you started to receive these benefits.

john180710

BoGoF,

In response,

Firstly - I'm not a tax expert. I've worked for 10 years, and for the majority of those I've had some sort of BIK and it's never been an issue. Therefore I saw no reason to question my tax situation. I've also changed roles in the last few years and my salary has changed. However given what has happened, I will be looking at these more closely in future to just to check if the HMRC has made any more mistakes.

Secondly - regarding the 'incompetence', as far as I am concerned my company filed the P11D's at the right time - however the tax office decided not to anything with these for over 8+ months (he admitted this to me on the phone). If this was any private company it would be out of business by now if run this way. Not good enough, expecially as tax payers (who are on the receving end of their mistakes at the moment) fund HMRC.

chrismac1

If this was an exceptional case of incompetence you could say fair enough. But it's not. Our tax system is run by a right shower who make every effort NOT to do anything - even simple things like adding a postcode to an address. Yet if the taxpayer should make a much smaller error or omission HMRC come down on him or her like a ton of bricks. Well in my humble opinion there are now enough really cheesed off taxpayers with mucked up tax - from 18-year olds with 2 or 3 bar jobs, through working guys like the OP, to pensioners who have had the tax on their pensions mucked up - that there could be votes in this for any party bold enough to call time on the whole farce.

"Vote for us, we're going to give HMRC a good kicking until they can be bothered to give out e-mail addresses and answer letters within a month, so no-one needs to wait ten minutes on an answerphone to speak to someone whose aim is not to do anything."

I admit the message needs to get a bit cruchier than that. But any party who made it clear they were going to go through HMRC like a dose of salts and not take "it's not in our procedures, Guv" for an answer would grab my attention and most of my clients too.

BoGoF

"Give HMRC a good kicking" - is that not what happened under the previous government ?.....30,000 job losses since the merger between IR & Customs. Perhaps the root cause of the problem? Careful what you wish for, remember they act on the Treasury's instructions.

And no, I don't work for them.