Taxable earnings declared in wrong tax year (Asda)

brendon

My mother has recently had notice from HMRC that income tax for 2012-2013 was underpaid. When I have looked at the pay statements, it seems her employer (Asda) have declared taxable income from 11th March, 2012 to 5th April, 2013 (roughly). It was my understanding that a new tax year starts on 5th April, and the declared taxable income should be from April to April. Working on that basis, it seems Asda have paid the correct amount of tax but overstated earnings. (And since HMRC are calculating the tax on earnings, they are saying it is underpaid).

Is it correct to declare earnings in this way? It strikes me as quite unfair, since employees are effectively paying 13 months tax -- for people near the tax allowance, it could mean they are paying more tax.

It seems that many Asda employees are having similar problems with underpaid tax.

dori2o

I know a few friends who work for ASDA and they have all received calculations to say they have underpaid.

How often are people from ASDA paid? If monthly what date of the month? If weekly what day of the week?

Remember that PAYE operates on the basis of when the money is received not when it is earned, so if a person starts work for their employer on 10 march 2012, but does not receive their first salary until 6 April or later, then the salary they receive for that work they did between 10 March and 5 April will be deemed as taxable in the 12/13 tax year, not the 11/12. Still if the employer was operating PAYE correctly over 12 months/52 weeks then there should be no problem.

I wonder if this may be one of the rare occasions where week 53 or week 56 rules may have applied?

EDIT: Having spoken to a friend who works at ASDA, he confirmed they are paid 4 weekly.

My guess is that the OP's mum received a payment on the 5th April. This would mean they have had 56 weeks personal allowance and the underpayment, which I guess is approx £125, is down to this.

There is nothing that can be done to prevent this. It's a common occurrance this year as the 5th April fell on a Friday, and many employers who pay weekly/4weekly pay on a Friday.

chrisbur

The new tax year starts on 6 April. I would assume that your mother is paid every four weeks and so her payday fell on 5 April. When this happens the 5 April payday becomes week 56 as the 52 weeks have already been used up.. The employer gives an extra tax allowance over the normal years allowance which was used up at week 52. The tax office are then working out the tax due using just the normal tax allowance and are spreading the underpaid tax over the next year. The tax office did ask employers to warn affected employees this would happen,but I suspect that few did.
The problem stems from there not being 52 weeks in a year but 52 weeks and on average almost 1.25 days. These build up over the years and you get a week 53 for weekly paid employees a week 54 for two-weekly paid employees and a week 56 for four weekly paid employees. This only happens to four weekly paid employees about every 22 years.

Details on page 8 of
http://www.hmrc.gov.uk/payerti/forms-updates/employer-bulletin/bulletin44.pdf

suso

My next door neighbour works for ASDA and this is a known problem for them, all employees were advised to contact their pay roll department to have it explained.

It was a week 56 payment that was taxed giving an extra 4 weeks allowance.

It resulted in an underpayment of 124.00 which is going to be collected in next years code.

ca55ie

Thanks all - for explaining this. Daughters form arrived Friday and I was wondering about it. As usual members here have it all in hand :beer:

scuddy

suso wrote: »

My next door neighbour works for ASDA and this is a known problem for them, all employees were advised to contact their pay roll department to have it explained.

It was a week 56 payment that was taxed giving an extra 4 weeks allowance.

It resulted in an underpayment of 124.00 which is going to be collected in next years code.

NOBODY who works on the shop floor has been contacted and told anything about this whatsoever. I am the GMB union rep in a store, and trust me on this, nobody was aware this was how it was going to be dealt with. There is only one payroll department based in Leeds. There are no individual payroll's for stores etc.

jimmo

scuddy wrote: »

NOBODY who works on the shop floor has been contacted and told anything about this whatsoever. I am the GMB union rep in a store, and trust me on this, nobody was aware this was how it was going to be dealt with. There is only one payroll department based in Leeds. There are no individual payroll's for stores etc.

So what exactly are you trying to say?

Is ASDA the employer in the wrong for failure to communicate to its employees?

Is the GMB in the wrong for failure to communicate to its members?

Is HMRC wrong for allowing the underpayments to accrue and then trying to recover them?

As it happens, despite being a former employee of HMRC, I think HMRC is more likely to be the guilty party than anyone else because before Self Assessment came into existence a Schedule E Assessment would include a week 53, (fortnightly paid) week 54 and (4 weekly paid) week 56 adjustment in the assessment and individual tax payers would not suffer, tax wise, because of the foibles of the calendar or the employers’ pay system.

That suddenly stopped when Self Assessment was introduced but the “assessing tolerances” that HMRC use will normally mean that weekly paid and fortnightly paid employees will not be charged if the only issue the week 53 or week 54 payment.

Not so, I am afraid, for people who are paid 4 weekly. The underpayment is too big for the “assessing tolerance” and will be assessed. Unfortunately for you and your colleagues, the law is on HMRC’s side because the rules were changed to fit in with Self Assessment but was that fair?

Your apparent claim that ASDA, the employer, never informed the shop floor seems to be in direct conflict with this.

suso wrote: »

My next door neighbour works for ASDA and this is a known problem for them, all employees were advised to contact their pay roll department to have it explained.

It was a week 56 payment that was taxed giving an extra 4 weeks allowance.

It resulted in an underpayment of 124.00 which is going to be collected in next years code.

However, in many ways it really doesn’t matter whether ASDA advised its staff or not (but I would also question the GMB’s responsibility in all this).

For 4 weekly paid staff this is a once in 20 years occurrence and this is the first time it has happened since Self Assessment was introduced.

If you are effected your enemy is HMRC, not your employer and not your trade union and both you and your trade union need to focus on the morality of HMRC doing away with week 53.54 and 56 adjustments rather than any failures of your employer or your trade union.

ScotsLass84

I too work for Asda and am being charged £127, as are most of my colleagues. I have one bit of information I feel could help us though. We are given mini pocket calendars each year with our pay dates circled, these are ALWAYS Fridays, without fail. In 2012 however, Thursday 4th April was circled, and correct me if im wrong please, but that would have solved the entire problem and given us 13 pays this tax year instead of the 14. We asked at the time why it was Thursday, they said it was a mistake and to forget about it. Is this evidence they saw the problem very early on and could have solved it?

chrisbur

ScotsLass84 wrote: »

I too work for Asda and am being charged £127, as are most of my colleagues. I have one bit of information I feel could help us though. We are given mini pocket calendars each year with our pay dates circled, these are ALWAYS Fridays, without fail. In 2012 however, Thursday 4th April was circled, and correct me if im wrong please, but that would have solved the entire problem and given us 13 pays this tax year instead of the 14. We asked at the time why it was Thursday, they said it was a mistake and to forget about it. Is this evidence they saw the problem very early on and could have solved it?

This does not alter the fact that thirteen pay periods cover only 364 days while the year is 365 or 366 days. To do this you would have to move the payday one or two days earlier every year. This was not something caused by last tax year it was something caused by the pay periods not fitting the calendar year, last tax year's 14 pay periods was to bring the pay periods back in line with the calendar as every year they creep out of line.

jem16

ScotsLass84 wrote: »

I too work for Asda and am being charged £127, as are most of my colleagues.

What option/s has HMRC given for paying it back? Is it to be coded out through 2013/14 or are they asking for a lump sum payment or do you have a choice?

I have one bit of information I feel could help us though. We are given mini pocket calendars each year with our pay dates circled, these are ALWAYS Fridays, without fail. In 2012 however, Thursday 4th April was circled, and correct me if im wrong please, but that would have solved the entire problem and given us 13 pays this tax year instead of the 14.

In 2012, the 4th April was a Wednesday and not a Thursday. However if we assume you meant Thursday 5th April all that would have meant was that you had a 14th pay in 2011/12 as opposed to 2012/13.

We asked at the time why it was Thursday, they said it was a mistake and to forget about it. Is this evidence they saw the problem very early on and could have solved it?

Nothing would solve the problem unless, as chrisbur says, you make the year have 364 days instead of 365. For 4 weekly paid employees this situation will arise every 22 years and is totally unavoidable.

The only solution is for everyone to be paid monthly and not weekly, fortnightly or 4 weekly as this situation never arises for monthly paid employees.

bri365

I too work for Asda and even though this is a pain in the backside for those affected, we are going to have to pay up due to the week 56 rule. There is nothing we can do about it apart from complain to head office that they should have given us warning on this and explained things to us.
Asda according to HMRC were aware that this was going to happen yet chose to do nothing about it, even the Union have been silent on this matter.
In normal cases the HMRC will adjust your tax code to reclaim this money but due to the majority of Asda colleagues working part time and not earning enough to be taxed on this years allowance, we will have to pay this money to the HMRC by 3rd August. :mad: