Underpaid PAYE Tax - Shock £2k bill!! Beware...

Mikeyorks

Danno_Collins wrote: »

Hi Mike, thanks for your reply. I need to do more research, but from what HMRC said... 08/09 is was in 20% and the commission paid afterwards took me into the 40% bracket.

That's the reason I asked - as the underpayment could only have realistically arisen that way. Given you've been told it's down to a post - P45 payment.

But also something about my employer changing the correct code to a BR code... whatever that means

Chrisbur has covered most of it at post #8. At the time 'BR' (deducts 20%) was the correct way to do it. But would create an underpayment if part / whole was chargeable at 40%.

Although my understanding was that the letter to you (from the employer) - should also go to HMRC. This freshly taken from the HMRC site - but I can't quantify if that was in place during 08-09.

If you have to make payments after the P45 has been issued then you should give a letter to your employee confirming the payment details. A copy of this letter should also be sent to your PAYE tax office

chrisbur

Mikeyorks wrote: »

Although my understanding was that the letter to you (from the employer) - should also go to HMRC. This freshly taken from the HMRC site - but I can't quantify if that was in place during 08-09.

The HMRC seem to be giving one advice to employers who look on the web site ....
"If you have to make payments after the P45 has been issued then you should give a letter to your employee confirming the payment details. A copy of this letter should also be sent to your PAYE tax office"

and different advice to employers who look at the CWG2(2012) the Employer Further Guide to PAYE and NICs....
"You do not need to notify us at the time of making the extra payment, although you must ensure that it is recorded on form P14 at the end of the tax year."

I have no idea how long it has been like this, strange!

dori2o

chrisbur wrote: »

The HMRC seem to be giving one advice to employers who look on the web site ....
"If you have to make payments after the P45 has been issued then you should give a letter to your employee confirming the payment details. A copy of this letter should also be sent to your PAYE tax office"

and different advice to employers who look at the CWG2(2012) the Employer Further Guide to PAYE and NICs....
"You do not need to notify us at the time of making the extra payment, although you must ensure that it is recorded on form P14 at the end of the tax year."

I have no idea how long it has been like this, strange!

I think the word highlighted in red is the important one in the quote.

Had the wording been, 'you must send a copy.....' etc etc then I could understand it.

From what has been decribed it looks as though a payment has been made after the employee has left the employer and the P45 issued.

As has been advised already the employers instructions at the time were to deduct tax from the payment at the Basic Rate.

Even if the information had been passed onto HMRC at the time the payment was made it is unlikely that any adjustment could have been made at the time to mitigate the tax underpayment, especially in cases where the individual is a 40% tax payer.

Unfortunately their is no fault on any side as far as I can see. (assuming it is a simple case of payment after leaving).

chrismac1

So the key issue is:

1. This payment was made early in 09/10, call it May 09.
2. HMRC have just notified the guy of a problem.
3. Why did they wait 3 years nearly?
4. When did they receive the last piece of information which they waited until Feb 12 to use?

If it were me, I would not be going away any time soon on this one.

Mikeyorks

dori2o wrote: »

I think the word highlighted in red is the important one in the quote.

Had the wording been, 'you must send a copy.....' etc etc then I could understand it.

I was always of the impression that the letter to HMRC (in advance of the P14) where a payment is made after the P45 .... was in order HMRC could then provide corrected figures to the new employer. All a bit pointless otherwise.

In the same way, and surely for the same reason, a letter is required (same terminology) where it's discovered the P45 contains erroneous figures?

If you made an error on the P45 and have already sent it to the employee and/or PAYE tax office (or sent it online), you should send a letter to your PAYE tax office confirming what the errors were and also send a copy of the letter to the employee

AirlieBird

chrisbur wrote: »

The HMRC seem to be giving one advice to employers who look on the web site ....
"If you have to make payments after the P45 has been issued then you should give a letter to your employee confirming the payment details. A copy of this letter should also be sent to your PAYE tax office"

and different advice to employers who look at the CWG2(2012) the Employer Further Guide to PAYE and NICs....
"You do not need to notify us at the time of making the extra payment, although you must ensure that it is recorded on form P14 at the end of the tax year."

There is no difference. The CWG2(2012) states:
"you make the payment to the employee after the employee leaves

[FONT=HMRCModena,HMRCModena][/FONT]
[FONT=HMRCModena,HMRCModena]
[FONT=HMRCModena,HMRCModena]— do not issue a further form P45. Instead write to us advising us of the amount and date of the lumpsum payment and the amount of tax deducted [/FONT]
[FONT=HMRCModena,HMRCModena]
— provide the employee with a copy of the letter you send to us.

[/FONT]


[/FONT] "

The section you quote is for standard payments made after an employee leaves. The section I quote is for one-off payments made after an employee leaves. Redundancy, PILON and payment for accrued holidays are classified as one-off payments.

Danno_Collins

Thanks everyone for your kind help...

I'll be putting my case together in a letter and sending it off to HMRC in Newcastle. Hopefully with your assistance I can clear this up, although it seems from what you're saying that no-one really is to blame for this really... and the main grievance is down to HMRC's illogical procedures, and taking such a long time to come back to me for underpayment.

What do you think the chances are of getting them to waive it?

chrisbur

AirlieBird wrote: »

The section you quote is for standard payments made after an employee leaves. The section I quote is for one-off payments made after an employee leaves. Redundancy, PILON and payment for accrued holidays are classified as one-off payments.

The CWG2 seems to me to includes these payments (apart from redundancy) in the standard payment section...

"Standard payments made when, or after, an employee leaves

For the purposes of this guidance, ‘standard’ payments mean such items as the final payment of salary or wages, holiday pay, week in hand payments, bonuses, arrears of pay and so on. It does not mean additional one-off payments such as retirement, redundancy, lump sums and so on – these payments are dealt with on page 77."

I assumed that commision fell into the and so on.

It seems strange to me that there should be two ways of dealing with these payments after all the affect of the payment is the same whatever it is for. £1000 paid as holiday is going to have the same affect on your tax as £1000 of lump sum.

chrisbur

Danno_Collins wrote: »

What do you think the chances are of getting them to waive it?

No idea but good luck and if they reject it to start with keep trying.

Danno_Collins

Cheers Chris... I'll keep trying, and all this information gives me a good start. Great site, and many thanks to all the Money Savings Experts!