Tax Relief Error

coachtug

Sorry, yes it was the company that informed me. I've never heard anything from HMRC.

It may be a day or so before I can go through my P60s, due to work & children!

I no longer work for the company that made the mistake but they've been hassling me since I left!

jem16

coachtug wrote: »

Thats interesting, I've heard nothing from HMRC and I even spoke to them about claiming 40% tax relief so I assume that they would have looked at my numbers then.

Almost certainly. Have you claimed 40% tax relief through your tax return or through a change to your tax code?

So I could be in the clear but the company hasn't paid HMRC enough?

Difficult to tell without all the info. This might be a thread more suited to the tax board. There are more tax experts there.

Certainly your P60 figures would help.

If I am in the clear with my tax, could the company be looking to recoup any money they can to offset their mistake? (which was my suspicion)

Quite probably.

jamesd

P60 or other pay figures would definitely help here, to show how they did the double tax relief. That could have been done in a way that got you more money in the pension pot or it could have been done in a way that got you more net pay. That may affect what seems to be the fairest resolution - if it was extra money in the pension pot and the same net pay then taking it out of the pension pot would make a lot of sense.

When setting up a pension scheme one way things that a company has to do is tell the pension provider whether the money is coming from gross pay or net pay. Gross means don't add any tax relief, net means add it. It may be the case that the pension provider was told it was net when it was actually gross.

coachtug

Hi

I have found a P60 for 2007-08 which was when the error was happening

Pay: £45937
Tax code: 522L
Tax paid £9787
NI Paid £3389

No loans/payments/deductions etc

I was paying approx 4% into a pension if my memory is correct.

So I think I have paid the correct amount of tax?

coachtug

The 40% tax relief was via an increase in my tax code.

jem16

coachtug wrote: »

So I think I have paid the correct amount of tax?

On the reported figures on the P60, yes you have paid the correct amount of tax.

However your NI is higher than it should be for that gross salary so it seems to indicate to me that your taxable pay was less than your gross pay which indicates that pension contributions have been deducted before tax thus giving you double tax relief as the company has indicated.

For example on a gross salary of £45,937, £3371 would be due in NI.

However you have paid £3389 which would come from a gross salary of roughly £47,800.

To HMRC it doesn't look like you owe tax as your P60 is correct with regards taxable pay and tax paid.

However you have been getting double tax relief - 40% at source and a further 20% through the pension provider. You probably also claimed an extra 20% for higher rate tax relief, although your tax code of 522L does not show any adjustment for higher rate tax relief.

It has been employer error and technically it is owed but to whom is not exactly clear. I wonder if HMRC have noticed the error and are now chasing the employer.

coachtug wrote: »

The 40% tax relief was via an increase in my tax code.

Not on those P60 figures. 522L was the normal code for that tax year.

coachtug

Thanks, I'll go through pay slips and total up then compare with P60.

I only started claiming the 40% from April 2011.

I wonder if I could offset 40% against the double tax relief (if that is what has happened) - it might help redress things a bit?

jamesd

coachtug wrote: »

The PAYE tax relief was stopped and we continued to receive the tax relief into our pension plan. ... However the company wants us to give it permission to take the money out of our pension plan

jem16 wrote: »

However your NI is higher than it should be for that gross salary so it seems to indicate to me that your taxable pay was less than your gross pay which indicates that pension contributions have been deducted before tax thus giving you double tax relief as the company has indicated.

That combination means that the company was paying gross but seems to have told the pension company it was net, so the pension company also added the tax relief. This means that the fix suggested by the company is the correct one to use - you have more money in your pension pot than you should but the correct amount of net pay provided to you. It would be unfair to employees to take it out of net pay because some couldn't afford that.

You can expect the pension contributions to be multiplied by 0.8 and all of the investment returns adjusted accordingly to recalculate your position to the correct one.

What does your employer suggest you and others do with HMRC about your own income tax at the moment? Wait for them to provide corrected figures for pension contributions for each year, then tell HMRC?

Someone needs to look at the P60s for each year and work out whether you were or weren't getting higher rate tax relief.

jem16

jamesd wrote: »

Someone needs to look at the P60s for each year and work out whether you were or weren't getting higher rate tax relief.

If paid from gross pay, then any higher rate tax relief would have been automatic with no need to claim.

coachtug

I totalled up my payslips and compared with P60 which confirms your thoughts that the P60 shows income after my pension contributions were taken off.

So I do owe HMRC and presumably as you say the 40% would have been taken care of.

But my dilemma is how to pay it, do I allow company to take full amount from my pension - before they pay HMRC. How do I know HMRC is aware or will even get money from the company?

If I am only liable for 4 years then the amount would be less I am being asked for (the company currently wants £2.5k)

If I go to HMRC direct will they want a lump payment or adjust via tax code? I certainly don't have that kind of money to hand!