Benefit in Kind Tax

disgruntledemployee_2

Hi all,

I work for a high street bank and three years ago took out a staff mortgage.

At the time of taking out the mortgage the sales adviser did not provide any information regarding BIK tax so it was a complete shock to me when I started receiving letters in November last year advising me of underpaid tax and changes to my Tax Code.

Several letters were received from HMRC and I have been left with an amount of arrears which this tax year they are deducting from my salary by slashing my Tax Code (I have lost around £5k of my allowance).

After receiving all of this information I reviewed all the paperwork regarding my mortgage and neither my KFI, Mortgage Offer or Terms & Conditions booklet advise that this is a staff mortgage and none of them indicate that I would be subject to any form of taxation. As I work in complaints I thought that I had good grounds to make a complaint on the basis that I have been mis-sold/mis-advised.

I duly sent a complaint to our Head Office stating that I wished to be compensated for the loss of my earnings through their negligence and that to stop any further loss wished them to change me to a similar product but on a public rate similar to that I have been receiving. Personally, I thought that given the lack of any sort of condition on my mortgage documentation that they would have no choice but to do this as my current mortgage is surely not compliant with any current regulations.

A great deal of time has elapsed and I have finally received a response. I will not call it a resolution as it does not meet the criteria for a resolution letter. They have not apologised, admitted any fault or provided any form of compensation. They have simply stated that the only option for redress is to cover the tax liability until the end of this month after that I am on my own. They advise that there was no similar public product on sale at the time and that they cannot provide me with a similar public product now as I am currently outside of lending criteria as my LTV is too high.

I think that this is disgusting and to make matters work they intend providing this redress via payroll. Does this mean that they honestly think that they can pay me it so I get taxed on it again????

I am currently debating going back to Head Office to give them one last chance prior to going to the FOS as I know a FOS investigation can take some time before any form of resolution is agreed.

My question to you lovely people is do I have the grounds I believe I do to say that this mortgage is non compliant and that I have been mis-sold? If this is the case my employer/mortgage provider should do something about it. If they cannot offer me a rate surely I should not have to pay for the privelege of going elsewhere?

Thanks in advance for your advice.

Senior_Paper_Monitor

Was sale (see your KFI) advised or not.

It probably makes no difference to the outcome of a complaint, as no KFI (or other document within the mortgage process) indicates any tax implications, but it would be a starting point to consider your 'potential claim'.

opinions4u

Were you advised on which product to take?

Were you offered an informed choice?

Or did you simply ask for the staff product?

I know my former employer took the view that the staff member was responsible for their own tax affairs and that fell outside the scope of "advice" when it came to the mortgage. They did, admittedly, include lengthy paragraphs in their online staff handbook that ensuredstaff who made a bit of effort could do the sums and work out for themselves whether or not it was a good idea.

One other point, BIK was minimal on many staff products 3 years ago. If you've followed base rate down 5%+ your tax liability will have increased as HMRC have only reduced their official rate by 2.25%. I don't think any adviser could reasonably have forseen this.

As for further redress - I think you're playing with fire. Good luck!

noodle

I appreciate that this is annoying, and you might well have cause to complain about a lack of information in the advice you took... but have you actually lost anything?

If there is tax then, generally speaking, there's a benefit... so you're not worse off - you're just now having to find tax that you'd have paid earlier if things had been in better order.

Put it another way, if you'd known about the tax at the time would you still have taken the deal?

opinions4u

noodle wrote: »

I appreciate that this is annoying, and you might well have cause to complain about a lack of information in the advice you took... but have you actually lost anything?

If there is tax then, generally speaking, there's a benefit... so you're not worse off - you're just now having to find tax that you'd have paid earlier if things had been in better order.

Put it another way, if you'd known about the tax at the time would you still have taken the deal?

HMRC calculate the value of the benefit against a 4% rate.

If the staff rate is a base rate tracker charging 0.5% then a basic rate taxpayer gets a tax bill of 0.7% of the mortgage balance - 20% of (4%-0.5%).

If the public rate at the time of taking the mortgage was base rate plus 0.25% the OP could have had that with no tax liability.

noodle

opinions4u wrote: »

HMRC calculate the value of the benefit against a 4% rate.

If the staff rate is a base rate tracker charging 0.5% then a basic rate taxpayer gets a tax bill of 0.7% of the mortgage balance - 20% of (4%-0.5%).

If the public rate at the time of taking the mortgage was base rate plus 0.25% the OP could have had that with no tax liability.

I see. So the OP needs to do the sums to see if s/he would have been better off with a 'public' mortgage. If so, then, notwithstanding the need for personal responsibility (nobody should ever assume that their employer can hand out benefits without there being tax implications - and should, at the very least, ask) may raise it as an internal HR issue, if not a mis-selling issue.

If an employee at my company lost out because we offered a benefit which made them worse off, and which they'd not have taken if we'd supplied all the relevant information, then they'd be restored to the correct position.

Thrugelmir

disgruntledemployee wrote: »

At the time of taking out the mortgage the sales adviser did not provide any information regarding BIK tax so it was a complete shock to me when I started receiving letters in November last year advising me of underpaid tax and changes to my Tax Code.

Welcome to MSE Newbie.

Did you read the "staff handbook" section on employee benefits? I'm sure that your employer has covered this topic in detail. As its not a new issue but has been around for many years.

Have you not received P11d's for the tax years that you've had your staff mortgage?

disgruntledemployee_2

Thrugelmir wrote: »

Welcome to MSE Newbie.

Did you read the "staff handbook" section on employee benefits? I'm sure that your employer has covered this topic in detail. As its not a new issue but has been around for many years.

Have you not received P11d's for the tax years that you've had your staff mortgage?

Need to check the handbook but don't believe it is in there otherwise the company would not have offered to pay anything out as it would be my error.

As far as P11d's go I did not know that they existed until being requested for it by the complaint handler. It seems that we are not provided with a physical document but the information is available on the HR system but you have to know it exists and go looking for it.

I can accept that there is a liability for the benefit of having the mortgage and after doing the sums against other products on the market I would still be better off on the staff product. The point is that I was not made aware of tax or the implications or even advised that you should receive a P11d. So if I have not technically been mis-advised the company has failed in its duty of care to make me aware surely?

Thrugelmir

Maybe you should have received a document at the outset as it was a staff mortgage. Merely to cover your employer against such a claim as you've made. Though I doubt your employer would have given any advice as such. Just pointed out the rules governing beneficial loans, which have been in place for many years.

kingstreet

Did you receive advice?

Were you given an Initial Disclosure Document, later a Key Facts Illustration and finally a Suitability Letter which confirmed the basis of the advice?

junglizt

I work for a high street bank who also offers a 0.5 with 90% LTV staff rate.

On applying for the mortgage I was told that I could be liable for BIK + all the documentation over the Intranet states that you maybe liable for BIK tax. I think I worked it out to be around 2-2.1% comparable.

I don't want to sound offensive in anyway but it's a bit silly to imagine you would get a company benefit and the UK Gov wouldn't find a way of taxing it in some way!