Underpayment of Tax

Sunflower001

The Tax Office have written to me saying that I owe them back tax on my ESA Benefit from 21 June 2010 until 5 April 2011. My Employer at the time, was paying me through the Income Protection Scheme Insurers, as I was on long term sickness and tax was being taken. They were regularly sending me monthly wage slips and P11D forms. In the meantime the Tax Office was sending me various Codes about my allowance, but my employers had not changed my Tax Code to reflect these since I started there in 2008, its always been the same tax code.

I wrote to the Tax office to say that I thought my Employers were at fault, as I thought they had the right tax code to cover this. I sent them copies of all my P11Ds and Tax Codings. I have since left my job due to my ill health and cannot work anymore, but I am still on ESA and getting paid through the Insurers and my questions is whether I will have to pay this back payment and also will I get another tax shock this/next year, as Im still on ESA?

I telephoned the Insurers and advised that my new Tax Coding has now arrived and did they want it and they said they didnt. I now get paid directly through the Insurers and this goes directly into my Bank, so I cannot see how much tax is being taken.

Any constructive comments on the above would be greatly appreciated thanks!

Skint_yet_Again

Sunflower001 wrote: »

The Tax Office have written to me saying that I owe them back tax on my ESA Benefit from 21 June 2010 until 5 April 2011. My Employer at the time, was paying me through the Income Protection Scheme Insurers, as I was on long term sickness and tax was being taken. They were regularly sending me monthly wage slips and P11D forms. In the meantime the Tax Office was sending me various Codes about my allowance, but my employers had not changed my Tax Code to reflect these since I started there in 2008, its always been the same tax code.

I wrote to the Tax office to say that I thought my Employers were at fault, as I thought they had the right tax code to cover this. I sent them copies of all my P11Ds and Tax Codings. I have since left my job due to my ill health and cannot work anymore, but I am still on ESA and getting paid through the Insurers and my questions is whether I will have to pay this back payment and also will I get another tax shock this/next year, as Im still on ESA?

I telephoned the Insurers and advised that my new Tax Coding has now arrived and did they want it and they said they didnt. I now get paid directly through the Insurers and this goes directly into my Bank, so I cannot see how much tax is being taken.

Any constructive comments on the above would be greatly appreciated thanks!

Hi Sunflower, the first step is to check the P800 tax calculation for 2010/11 is correct if you have not already done this. Did you get a P60 from your employer & a P60u from the ESA office for year ending 5 April 2011 ? These will show the tax codes in operation at year ending 5 April 2011. If you post the details of income/tax deducted/codes used on your P60/P60u & the amount on your P11d to 5/4/2011 (cash equivalent taxable benefits), together with the details of income and tax deducted on the P800 someone can check this for you.
Secondly, if you were receiving tax codes and payslips why did you not check the tax codes against the payslips at the time and advise HMRC that your employer was not using the correct tax code ? HMRC may want to know why you did not query this at the time as you are deemed responsible to advise them if the employer has not received/implemented changes in tax codes. If you do not inform HMRC at the time then they would not know your employer was not using the correct code until after the end of the tax year. Also check if the tax codes had the correct employer name on them, and the correct PAYE reference as if these details were incorrect your employer would never have received the tax codes. The correct PAYE reference should be on your employer P60 from your employer.

Finally, the only way you will know what tax code the insurers are using is to check current payslips if they send you one or phone and ask them. Check this against the current tax code HMRC have sent you. If you don't have a current tax code for 2011/12 you may need to phone HMRC and ask them what tax codes they have on record for you for current year.

Sunflower001

Thanks Skint Yet Again, I will look into this. Ive never had to do anything like this before, as Ive always been employed all my life and now through ill health have to retire, as such, although not old enough to collect my pension yet. Its a mine field for me, so Im still not too sure how and what I am looking for, but thanks once again for your answer, much appreciated!