Dreaded "Underpaid Tax" P800 Letter

carhandle

Morning all.

I am one of the chosen ones who have been lucky enough to receive an Underpaid Tax P800 Letter from HMRC for 2009/10 – Total Earnings £53123, Tax Paid £11179.2, Shortfall £841.34

Could someone who knows their way around these things please take a look at my circumstances and let me know whether I might have an “out”?

My situation, and the reason for the underpayment (according to person I talked to on HMRC’s helpline) is as follows:

My Tax Code is 647L.

I was employed from Day 1 of 2009/10 until 3rd March 2010 by one employer. I have been told that my PAYE payments were in line with what they should be for this period and there is no issue there. My earnings were £48,738.38 for this period and I had paid £10,264.94 tax which I believe to be correct.

I then began work with my new employer on 7th March 2010 and apparently its the period from then until the end of this tax year which caused the issue.
When I commenced employment with this employer, I had not yet received a P45. Therefore I completed a P46 Form and I ticked Box B to say that “This is now my only job, but since last 6 April I have had another job”

My new employer pay for Tax Period 12 was £4,384.62 and I paid £914.26 Tax. I am lead to believe that this was £841.34 short of what it should’ve been.

I am also lead to believe that my new employer has deducted tax at the Basic 20%. They had not taken into account the fact that I had been working from 6th April to 3rd March with my previous employer and had not taken into account the fact that I have earned more than £37,401 for the year which should push me into the 40% bracket.

Having been PAYE for all my working life (21 Years) and having never had neither a rebate nor shortfall I must admit this has come as something as a shock to me.

Would I have any grounds under which I might personally avoid paying back this £800+? For instance, going with the “my employer has not operated PAYE correctly” line?

Appreciate any help any can offer. Thank you.

roddydogs

Look up ESC A19, and draft a letter, what have you got to lose?

Pennywise

No, I don't think you can argue it's your new employer's fault, and even if you could, you still owe the tax.

Your new employer seems to have operated PAYE correctly upon being given a P46 from you. The HMRC instructions tell them to put you on the personal allowance tax code on a week 1/month 1 basis which is what they've done. They couldn't have taken your previous pay and tax into account without the P45.

At the end of the day, the "fault", if any, lies with whoever caused the P45 not to be given to the new employer before the end of the tax year 5 April. If your previous employer had delayed it's issue by over a month, then it's their fault. If, however, they issued it but you didn't give it to your new employer, then it's your fault.

But like I say, it doesn't matter who's fault it is. Had it been done right, you'd have had the right tax deducted. It hadn't, so you're now being asked for that exact same amount of tax to be paid. No difference.

HMRC are within official timescales to ask for this tax.

carhandle

Pennywise wrote: »

At the end of the day, the "fault", if any, lies with whoever caused the P45 not to be given to the new employer before the end of the tax year 5 April. If your previous employer had delayed it's issue by over a month, then it's their fault. If, however, they issued it but you didn't give it to your new employer, then it's your fault.
But like I say, it doesn't matter who's fault it is. Had it been done right, you'd have had the right tax deducted. It hadn't, so you're now being asked for that exact same amount of tax to be paid. No difference.

I didn't receive the P45 and I wasn't aware of its importance. I had worked for my previous employer for 16 years so I had little experience in changing employers and no feel of how important this form is (until now of course)

Now that I know why the shortfall occured I am not disputing the fact that my tax payments were less than what they should have been.

However, I did genuinely believe that my tax affairs were in order and having been PAYE for 21 years with no rebate or shortfall (until now) I had no reason to think they might not be. Might that help in any letter i might send to HMRC?

Pennywise

carhandle wrote: »

However, I did genuinely believe that my tax affairs were in order and having been PAYE for 21 years with no rebate or shortfall (until now) I had no reason to think they might not be. Might that help in any letter i might send to HMRC?

Google "ESC A19" - this is the only avenue where you can appeal, and by all means, it only costs a piece of paper and a stamp.

I wouldn't hold by breath though, because HMRC do expect a higher level of tax knowledge from higher rate taxpayers, and in fact, the law places a burden upon every single taxpayer to inform HMRC (to complete a self assessment tax return) if they have a higher rate tax liability. You may well fail in your appeal under ESC A19 because of this additional legal burden.

But, no harm in trying.

chrisbur

Can you give full details of how the tax office arrived at a shortfall of £831.34? The figures you have given show that the correct tax was paid for £53123 for a code of 647L. Did you have any taxable benefit, undertaxed savings income, or was the 647L code wrong?

I would assume that on the letter advising the shortfall there would be a calculation of it. This is what is needed to understand why there is a shortfall.

jennifernil

I agree, you have paid the correct tax for those earnings and tax code. Something does not add up if they are asking you to pay more.

Both employers have calculated your PAYE to within 50p of the precise amounts.

carhandle

chrisbur wrote: »

Can you give full details of how the tax office arrived at a shortfall of £831.34? The figures you have given show that the correct tax was paid for £53123 for a code of 647L. Did you have any taxable benefit, undertaxed savings income, or was the 647L code wrong?

chrisbur wrote: »

I would assume that on the letter advising the shortfall there would be a calculation of it. This is what is needed to understand why there is a shortfall.

I fed in the £53123 into a Tax Calculator and it did corroborate the figures in the letter. However, here’s the info I received on the letter:

PAYE Income = £53,123 (and Tax Paid = £10,227.86)
Personal Allowance = £6,475
Income tax is chargeable on £46,648

Tax on £46,648 is:
Basic Rate @ 20% on £37,400 = £7,480
Higher Rate @ 40% on £9,248 = £3,699.20
Tax Chargeable = £11,179.20

Tax Underpaid = £11,179.20 - £10,227.86 = £841.34


EDIT: D'oh - i think i've made a mistake in my Opening Post

chrisbur

carhandle wrote: »

I fed in the £53123 into a Tax Calculator and it did corroborate the figures in the letter. However, here’s the info I received on the letter:

PAYE Income = £53,123 (and Tax Paid = £10,227.86)
Personal Allowance = £6,475
Income tax is chargeable on £46,648

Tax on £46,648 is:
Basic Rate @ 20% on £37,400 = £7,480
Higher Rate @ 40% on £9,248 = £3,699.20
Tax Chargeable = £11,179.20

Tax Underpaid = £11,179.20 - £10,227.86 = £841.34


EDIT: D'oh - i think i've made a mistake in my Opening Post

This tax paid figure is lower than the P45 figure from your first employment so you need to query this with the tax office. You should have part 1A of the P45 (from first employer)and a P60 (from second employer) to show tax paid was correct, unless you have had a tax rebate at any time for this tax year.

jennifernil

So you had only paid a total of £10.227.86 in tax?

In that case you are underpaid.

Did you not make any pension contributions? These would have reduced your taxable income.

carhandle

Chrisbur, Jennifernil, I’m not much good at record keeping and would not be sure where these documents would be. I’ve moved house recently and they might have been misplaced (he says, looking for limp excuses).

I did have some taxable benefits at my previous employer and I did make pension contributions.

If I was requesting a copy of my P45/P60 documents, where would I go?