PAYE tax code error resulting in £9k tax underpayment - please advise...

PlutoinCapricorn

Gecko, have you seen PinkTeapot's very recent threads in the Cutting Tax board? This is possibly a more suitable place for this topic as there are more people there who thought that their affairs were in order then were suddenly hit for tax underpayments.

Some people report that they were successful when they fought on the grounds that HMRC had all the relevant information.

System

The OP needs to ask HMRC when they first issued a tax code to their employer. If it was issued when the OP started the job then the normal coding run in the January/February before the next tax year started would show the new code for the coming year. However if HMRC initially issued a simple personal allowance code ie 647L or 747L, with nothing included like benefits in kind (company car etc) then although the new code will show on the record each year it would not be sent out because HMRC would expect the employer to follow the new year uprating of personal allowances in line with the budget.

The op needs to ask HMRC to check each tax code and see if it says issue issue against the employee and employer. If it says not issued not issued then HMRC did not send a tax code electroniclly to either the OP or their employer because they assumed that the employer were already operating the correct tax code and it just needed uprated per the budget.

If HMRC failed to send out any code (ie none of the ones on screen say issue issue) then it is their error. If they did send one out and the employer failed to operate it then it should have been brought to HMRC's attention so they could issue it again. The OP should have done that.

gecko_

Pam17 wrote: »

The OP needs to ask HMRC when they first issued a tax code to their employer. If it was issued when the OP started the job then the normal coding run in the January/February before the next tax year started would show the new code for the coming year. However if HMRC initially issued a simple personal allowance code ie 647L or 747L, with nothing included like benefits in kind (company car etc) then although the new code will show on the record each year it would not be sent out because HMRC would expect the employer to follow the new year uprating of personal allowances in line with the budget.

The op needs to ask HMRC to check each tax code and see if it says issue issue against the employee and employer. If it says not issued not issued then HMRC did not send a tax code electroniclly to either the OP or their employer because they assumed that the employer were already operating the correct tax code and it just needed uprated per the budget.

If HMRC failed to send out any code (ie none of the ones on screen say issue issue) then it is their error. If they did send one out and the employer failed to operate it then it should have been brought to HMRC's attention so they could issue it again. The OP should have done that.

The 2010 - 2011 tax year and the 2011 - 2012 tax year are the years I earned more than £42,000 pushing me over the higher tax rate.

2010 - 2011 was only just into the 40% tax area. This is where HMRC noticed the first underpayment of tax but it wasn't by much and being on BR, once my allocation of tax free earnings came into play I believe this equalled out somewhat - I was not aware at this stage of anything being incorrect. The first I learned of anything being wrong was the letter last week about the last two years underpayment.

To avoid the same thing happening in the following tax year HMRC have confirmed to me that on 18/1/2011 they sent a new Tax code to my employer. They noticed that the correct Tax code had not been applied after a few months and again on 13/5/2011 issued the same Tax code again for the employer to initiate. Again the employer failed to use this Tax code so on two occasions they failed to follow the tax code supplied by HMRC. In 2011 - 2012 I earned some good bonuses and this is where the majority of the underpayment has come from.

If everything HMRC have said is true and they can prove that the tax codes were sent twice and on both occasions my employer failed in their responsibility to action either one of these tax codes, surely the employer must have to take at least some liability for the situation I am in - if not all? For the employer to say they either did not receive a letter or as a poster have pointed out, an electronic notification on two separate occasions there is no argument for "an honest mistake".

Have I got a valid argument?

gecko_

PlutoinCapricorn wrote: »

Gecko, have you seen PinkTeapot's very recent threads in the Cutting Tax board? This is possibly a more suitable place for this topic as there are more people there who thought that their affairs were in order then were suddenly hit for tax underpayments.

Some people report that they were successful when they fought on the grounds that HMRC had all the relevant information.

Thank you and sorry if this isn't in the most appropriate thread. Is there an easy way to move a thread to a different section or shall I re-post?

gecko_

jem16 wrote: »

..../tax-paye/employer-errors-deduction-paye.pdf

I think this should be your starting point for a complaint.

Thank you for this link - very helpful. To be honest it looks like I am holding out for employer error, with the error being that the employer ignored or failed to act responsibly in applying Tax codes supplied by HMRC or two occasions.

jem16 wrote: »

No I'm not. I'm saying that the average person should be able to ensure that the correct tax code is being operated each tax year. For most people this is in line with the personal allowance. So for example this tax year it's £8105 so the tax code for the normal under 65 will be 810L. If it's not that, you should be finding out why. This is nothing to do with tax tables or employer's payroll systems.

The annoying thing is that I know now, only as a result of this unfortunate issue. I've spoken to family and friends about this issue and I can honestly say not one of them knew what Tax code they are on, or what they actually meant. No excuse but maybe this is something HMRC should be looking at addressing.

jem16 wrote: »

Can you clarify what 2 years the underpayments have arisen from? Figures would also help to ensure that HMRC haven't made any mistakes as well which does happen.

The 2 years were 2010-2011 and 2011-2012 with the majority of the underpayment coming from the most recent year. I've gone through the records this weekend and to my limited knowledge the tax underpayment details that HMRC supplied seem about right.

gecko_

northerntwo1 wrote: »

Is your tax code not on your payslip?

Yes - it is BR and has been for my entire employment. For the first half of my employment I was earning under £35,000 so seeing 20% tax being paid seemed right and I had no idea what BR stood for or what I should expect to see as a Tax code.

When I earned in excess of £35,000 it was based on varying bonus amounts - for example I'd maybe get an extra £750 one month, nothing extra the next and maybe £1000 the following month. So seen as at this time I had been at the company for about 2 years with no letters or communication from anyone to suggest an error I had no reason to think anything would be incorrect.

northerntwo1

I get a letter every year from the Tax Office stating my Tax Code and asking me to check and to clarify. This letter has the codes and what they mean. If they neglected to send this to you then I would use this for your argument.

Miss_Havisham

gecko_ wrote: »

The annoying thing is that I know now, only as a result of this unfortunate issue. I've spoken to family and friends about this issue and I can honestly say not one of them knew what Tax code they are on, or what they actually meant. No excuse but maybe this is something HMRC should be looking at addressing.

.

no, it's something each and every tax payer should be addressing - their lack of understanding of the most important item on their payslip and P60 and P11D if you have any benefit-in-kind.

HMRC send out a notice of coding every year showing how they have arrived at your tax code for the next tax year. There is an explanatory booklet and contact number. If you have never received this then you should check that they have your correct address.

sleepless_saver

gecko_ wrote: »

The 2 years were 2010-2011 and 2011-2012 with the majority of the underpayment coming from the most recent year. I've gone through the records this weekend and to my limited knowledge the tax underpayment details that HMRC supplied seem about right.

You can use this useful website http://listentotaxman.com/ to check the figures for the relevant years in a bit more detail.

gecko_

Miss_Havisham wrote: »

no, it's something each and every tax payer should be addressing - their lack of understanding of the most important item on their payslip and P60 and P11D if you have any benefit-in-kind.

HMRC send out a notice of coding every year showing how they have arrived at your tax code for the next tax year. There is an explanatory booklet and contact number. If you have never received this then you should check that they have your correct address.

Sorry my point was that there is clearly a lack of general understanding on tax. HMRC should make more of an effort to make tax payers generally aware of their tax affairs. As an example, we know drink driving is wrong but this does not stop gov run ad campaigns bringing this to the publics attention. Its an exersice in public education that would clearly raise awarenesd and help. Do they have to? No. Should they? Probably yes.

Anyway, somwhat off track.