Owed Tax Through Civil Servant blunders

contation

Two years ago I was notified by Inland Revenue that the Tax code on my Territorial Army pay was to change from Basic Rate (BR) to a new code which takes into account my civilian employment. This would take me over the £50K bracket.

This all seems straight forward and fail. I recieved notification that JPAC (which is the government agency which looks after the pay of the armed forces). Had been instructed to make the change on a certain date.

Early this year I had a notifcation that owed £3500 of un paid tax from my TA earnings. I checked through my pay slips and while some identified that the tax code had changed others throughout the year were still on basic rate.

You may think that it would be easy to spot the difference in pay monthy on my TA earnings however due to the variaus comitment days I may work anything from a day to 6 days in a month with the TA, and due to this is is hard to tell what is the right amount of tax paid. That and the fact that I had been notified from one government agency that they had instructed another government agencey that the tax codes had to be change, I had though in good concience that this had been carried out.

Once notfied of the underpayment of tax I sent a letter to both Inland Revenue and JPAC identifiying the problem and the case of the unchanged tax code. In addition adding to my defences that I had been advised that this had occured.

The response from Inland Revenue was that JPAC had been advised on such a date to carry this forward and that they would identify specific dates,

The reponse from was that is was there view that they probably wasn't sent anything.

Frustrated I used a variation of Martins Letter to the Tax office, stating my displeasure, of the un accountability from two government offices, and the fact that my tax code STILL hadn't been changed and that I was STILL paying too little tax and nothing had been done about it for this tax year. I highlighted that I was not cash rich and the repayments for the year would be crippling to my and my family (which is true), I am the only earner and work approxmately 60 - 90 hours a week, with a demanding civilian job and being a resevist in a busy TA sqn, with three children, (no sob story just a point of fact).

Inland Revenue said they would start and investigation, whilst JPAC asked me to send them all the details I had recieved.

I recieved a letter from IR this morning, stating that they have kept me in formed at all times of what has been going on and that I am fully accountable for the £3500 repayment, which will be taken out of my earnings for this year.

I have heard nothing from JPAC.

I am at a loss of what to do, and frustrated that no one will come forward and admit to making an error with my tax payments, As stated I have notified both agencies months ago about the error in tax code and either on has made a successful bid to change it and rectify the payement. In addition due to this lack of effort it is me who has to find the money to pay the tax back. At no point am I whinging that I shouldn't, however if the money is to be paid back I believe I should be given ample time and resources to do so, for the sake of £300 a month.

Has anyone else had anything similar or can anyone offer advise?

Hoddie_2

One of the problems with the complicated tax system in the UK is where someone has two sources of income, neither of which would individually make you higher rate, but when combined they do. In your case your second income, the TA income, was taxed at BR until a certain point. You don't provide the details of this but I suspect your main income had a normal tax code, ending in L, which means that you not only had the benefit of your tax-free allowance against that income, but also the full basic rate band. Basically, until the new tax code was issued to TA, you had too much income taxed at the BR, and none at the higher rate (HR).

The tax you now owe will be the HR tax due on your income in the period until your tax code changed.

Things are unlikely to get any easier I'm afraid, as the basic rate restriction used to ensure you don't have too much income taxed at the BR, and not enough at the HR, is only ever an estimate based on the latest income details they hold, and as a result will need a review each year. This means that there's a good chance that you'll either owe them or, less likely, that they'll owe you every time this review is done. It's further complicated because they're recovering some underpayment from your income, and the calculation to collect this underpayment is also based on the same estimate using the latest income details they hold.

These can get very messy. It's one of the biggest areas where PAYE falls down.

The good news, if you like, is that you can minimise the risks here by ensuring that the tax office has up-to-date details of your income. Whenever anything changes, a pay rise, a bonus, if one of your incomes ceases, etc, call them to let them know. You might end up with more tax codes across the year doing it this way but at least the tax they collect will be more accurate.

If them collecting £3,500 from you this year, which as you say equates to about £300/month, is causing you problems, you may be able to ask them to spread it out over 36 months. This usually needs to be done in writing and it'll help if you mention the word 'hardship' somewhere in your letter. They may ask for justification but in my experience, which is a couple of years out of date to be honest, is that they don't.

System

contation wrote: »

This all seems straight forward and fail. I recieved notification that JPAC (which is the government agency which looks after the pay of the armed forces). Had been instructed to make the change on a certain date.

You may think that it would be easy to spot the difference in pay monthy on my TA earnings however due to the variaus comitment days I may work anything from a day to 6 days in a month with the TA, and due to this is is hard to tell what is the right amount of tax paid. That and the fact that I had been notified from one government agency that they had instructed another government agencey that the tax codes had to be change, I had though in good concience that this had been carried out.

Has anyone else had anything similar or can anyone offer advise?

Basically what you are saying is that HMRC sent an employer of yours a tax code to operate but the employer failed to use it and you didn't notice on your payslips that the code had not been changed.

This is not the fault of HMRC and so you could not make an appeal under ESC-A19, however you could make an appeal under employer error -

http://www.hmrc.gov.uk/thelibrary/tax-paye/employer-errors-deduction-paye.pdf.

If HMRC still insist that you are liable for the underpayment you can ask for it to be paid back over up to 3 years.