Tax underpayment – employers fault or mine

Monkey_Joe

Firstly, can people who actually have experience in a situation similar to this or extensive knowledge of the UK tax system please answer this query. The majority of people on this forum are of great help but there is a small minority that enjoy “scare mongering” and I would plead with these people just to ignore this post since to me it’s a very serious issue and I have been panicking about it all weekend and I dont need anything “made up” to add to my stress unless it facts from someone who knows what they are talking about.

I am employed by a company based in France. I am the UK representative and have a home office. I joined in September 2007 and have been paying UK tax, NI and student loan on my monthly salary every month. In addition, I also have a company car and have my work petrol expenses paid for. I only use the car for work. Until recently, I assumed that my employers have declared my company car and I have been paying the correct amount of tax that I should have been. I was wrong!

On Friday, I received P800 tax form for the 2007-2008, 2008-2009 and 2009-2010 tax. In summary, the form states that for all three years I have been underpaying tax and that I owe the following:

2007-2008
The cover letter states
“The amount of car benefit included in your PAYE code was lower than the amount taxable. This calculation includes an underpayment for an earlier year”
- The amount that I owe for this year is £423

2008-2009
The cover letter states
“The amount of car benefit included in your PAYE code was lower than the amount taxable. This calculation includes an underpayment for an earlier year”
- The amount that I owe for this year is £1120.68

2009-2010
The cover letter states
“The amount of medical expenses benefit included in your PAYE code was lower than the amount taxable. The amount of car benefits in your PAYE code was lower than the amount taxable. The amount of car fuel benefits included in your PAYE code was lower than the amount taxable. An underpayment for an earlier year was included in your PAYE tax code, but the actual amount underpaid for that year was higher. This calculation includes an underpayment for an earlier year. “
- The amount I owe for this year is £2468.88


My question is, Is it me who has made the mistake or have my employers made the mistake? I am employed and I was unaware that I was underpaying tax for 3 years. Im deducted around £600-700 (NI, PAYE and student loan) and as far as I was concerned I was put on the right tax code by my employer and they had informed the tax people of my car and benefits. In the past, in previous jobs, my employers have always handled this and ensured that I am deducted the correct amount.

The fact that this is the first time I have heard from the tax office in the 3 years I have been working for my employer and that they have sent all underpayments for 3 years in one go implies that my employers have only just informed them of my company car and benefits and hence the tax office have made the correct back dated calculations.
Is it me who has made the mistake or have my employers made the mistake? What are my options. The tax letter does say that if it is my employers who made the mistake and failed to declare the correct information then they are liable but are they and if so how do I show this? If its me in the wrong, will I be prosecuted? Will they take it all in one go?

Savvy_Sue

First, stop panicking. You probably can't do anything now until Monday, because I think the first step is to contact your employer.

Monkey_Joe wrote: »

Is it me who has made the mistake or have my employers made the mistake?

I think that this is your employers, not completing a P11D at the end of the relevant tax years, but I'm not entirely sure. It is possible that HMRC think you should have realised this and if you had, you should have asked for a self-assessment form.

Out of interest, what have your tax codes been in the last few years?

Monkey_Joe wrote: »

What are my options. The tax letter does say that if it is my employers who made the mistake and failed to declare the correct information then they are liable but are they and if so how do I show this?

You could phone the tax office (I think they are open during the day tomorrow) and ask how you would show it was your employer's fault and not yours. Then on Monday speak to your employer's HR dept and say what has happened, ask if they have been playing catch up or had an investigation, and see if that leads anywhere.

However it might be complicated by the fact that this is a French company who are presumably more au fait with the workings of the French tax system, which may well be very different ...

Monkey_Joe wrote: »

If its me in the wrong, will I be prosecuted?

Not unless you play silly bs with them and attempt to avoid payment.

Monkey_Joe wrote: »

Will they take it all in one go?

Not usually: normally they would change your tax code so that you pay more throughout this year. I think they can even spread it over two tax years if you ask, and as this is a sizeable sum I would do that!

Monkey_Joe

Thank you for taking the time to read my query and answering! appreciated.

I will call the tax office on Monday get some information and then call my employer. I have also heard that they should write of any tax owed if its older then 12 months therefore they should write off what they are asking for 2007-2008 and 2009-2010? or have I got this wrong?

My fear is that both the tax office and employer will say that it was down to me to figure it out! I have been paying around £600-700 worth of tax (PAYE, NI and student loan) on my monthly pay checks so as far as I was concerned everything was ok. The amount that Im was paying looked right to me how would I know if it was wrong? In the past, with old job, employers have always reported my company car to the tax office so I just assumed it was the case with my current employer. This is my only fault, assuming that my employers HR/Finance would do they job properly!

I fear that it would be me who has to end up paying everything!

Savvy_Sue

But I didn't ask how much tax / Ni you'd been paying, I asked what your tax codes were in those years. If they were the standard allowances (657L in the last tax year, I think) then you should perhaps have realised it wasn't right - at least it could be argued that you should have realised it wasn't right. Because there's no allowance for a car or private health insurance in that!

Monkey_Joe

My new tax code for Apr 2011 to Apr 2012 is 661L

In the past it was 647L

I assume its all my fault then and I should have spotted it based on the code? Im a complete taxaphobe! I have no knowledge of tax and like I said in the past my employers have always ensured that teh Tax office were always aware of my company car and so I assumed my new employer would do the same. I guess this is my only mistake and Im gonna be punished big time for it!

A harsh lesson learned!

However, I still believe that this is my employers fault and it was their failure to report my car and benefits that has landed me in this situation. If they did report it then its the Tax office fault for not acting on it!

Monkey_Joe

Another point I should mention is that I only use my company car for work and do not use it for private use. I keep a record of my mileage and so do my company. However, we can use it for private use but have to pay for own petrol, however i never do since I like to use the train or cycle in my private time.

DVardysShadow

Monkey_Joe wrote: »

Another point I should mention is that I only use my company car for work and do not use it for private use. I keep a record of my mileage and so do my company. However, we can use it for private use but have to pay for own petrol, however i never do since I like to use the train or cycle in my private time.

As you are a self confessed taxaphobe, you would do well to research this yourself. Start here http://www.hmrc.gov.uk/cars/employee-guidance.htm

It seems to me that as you have kept mileage records, you can show that there has been no private use.

withabix

It will have been your employer's fault initially, but have they provided you with any P11D forms?

The tax won't be written off, because it is almost certain that HMRC aren't at fault. They can only act on what information you or your employer give them.

The good news is you are likely to be due some tax relief for having a home office - this will help offset some of your tax bill, unless your employer has been reimbursing all costs (phone bill contribution, proportions of gas/electricity/broadband etc).

Monkey_Joe

withabix wrote: »

It will have been your employer's fault initially, but have they provided you with any P11D forms?

The tax won't be written off, because it is almost certain that HMRC aren't at fault. They can only act on what information you or your employer give them.

The good news is you are likely to be due some tax relief for having a home office - this will help offset some of your tax bill, unless your employer has been reimbursing all costs (phone bill contribution, proportions of gas/electricity/broadband etc).

No they have not sent me these forms. Should I have asked? I did not even know they existed until a previous poster mentioned them.

My knowledge about tax is limited but it appears to me that my employer failed to inform the tax office about my company car and benefits until this year. They tried to play catch up and once the tax office got all the information they sent the back dated bill.

Therefore, whose fault....mine or the employer? My tax letter says that if it was my employer who failed to send the relevant information then it is them who is liable. Surely, it is my employers HR and Finance department who should be informing the tax office about the company car? My job is to do what Im hired to do.

However it appears that it will be me who gets the full blame.

Dark_Jester

I think it looks as if that your employer failed to inform the tax people of the company car for the last few years but tried to play catch up this year! This explains why you have recieved a request for the last 3 years in one go - the tax people only just found out about the company car!

I would phone the tax people first and explain the situation and see what they have to say. Hopefully you dont get a self righteous !!!! who will keeping banging on about "how it was your responsibility to find out!", does my head in when they do that because they know that the majority of the "employed" population do not have the time to check through their tax form to see if everything is correct! If your taxed 600-700 per month normally anyway, how would you evcen know that you should have been taxed £100-200 extra more?!

Just explain it to them and see what they have to say, hopefully its your employer that screwed up!

Mrs_Arcanum

Is there not some correlation for tax purposes on the actual business miles? This may only apply to those who use their own car for business purposes though.