Self Assessment Tax Return dispute

terric

Hi everyone,

I've got myself into a bit of a predicament, and am hoping to get some advice on how best to deal with this.

In financial year April 2010 -2011 I submitted a zero tax return, only notifying them of what I'd been earning via PAYE during this time. However, I unintentionally missed out another employment I'd been earning a small amount on (honest mistake) but was paying tax via PAYE on this income too. So, I got a letter from HMRC saying that my return is being investigated, and yesterday get a bill for £1,905.

After looking through the stuff, I'd found that they'd added on what I'd earned from my 2nd small job to what I declared (which worked out another £6,000 for the year) but they had only discounted the tax paid on the 1st job (not the 2nd). So, here's what I'm currently doing.

1. Contacting this employer (or tax office if they can't provide it, as I think they're only obliged to keep it for 3 years) to obtain a P60 to show the amount of tax paid.
2. Contacting HMRC to notify them of this P60 and the amount paid in tax, which will be deducted from the £1,905 hopefully.
3. Paying what is left.

I know I'm liable for a penalty, but all I can say is that I did take "reasonable care" in filling in the return, but made an honest mistake. I have no income that I've not paid the tax on.

Has anyone else been in this situation? Am I looking at a world of pain?

Thanks

Davide123

HMRC nearly always have the correct information, so if they say tax wasn't deducted... But check payslips etc.

Penalty, if you did underpay then maybe, but tell them honest mistake etc. possibly you could get it suspended. (It would only probably be 10-20% of the tax underpaid)

terric

** ignore, multi-post when editing the one below sorry **

terric

Davide123 wrote: »

HMRC nearly always have the correct information, so if they say tax wasn't deducted... But check payslips etc.

Penalty, if you did underpay then maybe, but tell them honest mistake etc. possibly you could get it suspended. (It would only probably be 10-20% of the tax underpaid)

Hi, thanks for the reply. This is what I don't understand surely they have a record of the tax paid via PAYE, here's an example of what they've provided.

Submitted on return: £26,000
HMRC found: £32,000 (including £6,000 I'd missed off return earned from 2nd job)

So they've worked out the tax on 26,000, added 6,000 on to make 32,000 then worked out the tax on 32,000 and only deducted the tax I've paid on the 26,000 amount from this new tax calculation - completely ignoring the fact I've been paying tax via PAYE on the extra 6,000.

So, I'm hoping that I can say look, here's my P60 from the 6,000 job showing the amount of tax I paid via PAYE which they'll deduct from the amount they think I owe?

EDIT: I should also say that I've been through my bank statement, and the amount going into my bank matches what they have, so we're on the same page at least.

Davide123

Are you sure that tax was deducted from the second salary?

Davide123

Even though you were on paye, they may not have deducted tax if you were on wrong tax code.

terric

Davide123 wrote: »

Even though you were on paye, they may not have deducted tax if you were on wrong tax code.

I'm 100% certain tax was being deducted, my base rate was £150 per week, and my statements show I had £119.50 going into my bank weekly. The tax code may certainly be an issue though - but either way I was definitely having an amount deducted weekly.

Davide123

That looks like NI deductions rather than income tax.
Looks like you may have to pay this.
Tell HMRC you thought as paye it would all be taxed at source and innocent error to reporting on your tax return, they may be lenient with penalty and ay allow you to pay by instalments.
Let us know how you go.

dtaylor84

Bit steep for NI, which would be 11% of earnings above £110/week in 2010-11:

150-110 = 40
40 x 11% = £4.40.

Basic rate tax would be £150 x 20% = £30.

So I'd expect the correct net pay to be £115.60 per week.

System

HMRC can confirm the P60 details submitted by the second employer. You can ask them to send out the details to you in writing. However your payslips should show tax being deducted at source.
Does the £1905 bill include penalties? I would expect the tax bill on £6000 to be £1200.

agrinnall

You haven't explained why you don'y have the P60 for the second employment, which you are expected to keep for (I think) 6 years. Your employer is not allowed to issue a replacement so that's a non-starter.

Just because you were receiving a net payment doesn't necessarily mean the employer was actually paying it to HMRC. Which is where the P60 would come in, because you could show a reasonable expectation that it had been handed over.

One alternative may be to check your NI contributions record for that year to see if they came from both employers; while it may not prove that tax was paid it could be evidence that the employer did make some deductions.

http://www.hmrc.gov.uk/ni/intro/basics.htm#8