Company undeclared benefits in kind to hmrc and now I have to pay tax back

Lukeybaby86

Hi there,

In the past couple of months I have received several letters from hmrc stating I owe them money for unpaid tax from under declared earnings over the past 3 years that I worked for my old company. It states that my employer under declared my earnings/benefits in kind I received from them on the p11d form they received from them, and so I owe them money for unpaid tax.

My question is, as it's not my fault they were given false information, can I sue my old employer for the money I now have to pay back due to their mistake, or is there any other way of getting out of it?

Torry_Quine

No you must pay this. I see where you're coming from but you got the benefit

Lukeybaby86

I understand it needs to be paid, and am not necessarily disputing that, but more that it's the company’s fault so I feel they should be held liable.

agrinnall

But if they had declared it at the time you'd have had to pay the tax, so you have had the benefit of the unpaid tax as an interest free loan for several years. Now you have to pay it - if you can't pay it all at once then negotiate a repayment over time with HMRC.

booksurr

a P11D is part of an individual's tax records for which they, and they alone, are liable. All tax related records should be held by the individual so they have a record of what they received - so - did the company give you a copy and did you check it?

yes & yes - you have no case
yes and no - you have no case
no - you may have a small case for employer liability but I doubt you'd win if you sue your ex employer

Lukeybaby86

Yes I received a copy, but I had no way of knowing it was incorrect. The "benefit in kind" was the value of utility bills that the company paid for me (I was a pub manager so lived rent and bill free in the flat above for them) they declared it as "x" amount so I had no reason to query it.

The other thing I'm miffed about is I feel it was mis-sold to me, in a similar way to ppi. I also received medical insurance from them on top of my salary, not as a salary sacrifice, and when I opted into it I didn't realise it meant I had to pay tax on it, it was sold to me as free as part of working for them. Might seem naive to experts like you guys but I didn't realise.

xylophone

I was a pub manager

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323572/hs202.pdf

"Is my living accommodation exempt from tax?
Some living accommodation provided directly by your employer because
of your employment is exempt from tax. This does not apply where
an employer pays monetary accommodation allowances. The rules for
exemption are that:
• the living accommodation is necessary for the proper performance of
the duties of your job, or
• you are in the kind of employment where it is customary for living
accommodation to be provided and the living accommodation allows you
to perform your duties better, or
• you face a special threat to your security because of your job, and you live
in the living accommodation as a part of special security arrangements
in force to protect you.

The main occupations which satisfy the rules for exemption are:
• agricultural workers living on farms or agricultural estates
• lock-gate and level crossing gatekeepers
• caretakers who live on the premises for which they are responsible where
they are on call outside normal working hours
• stewards and greenkeepers who live on the premises they look after..............."
• managers of public houses who live on the premises

It might be worth checking out the above?
See also https://www.gov.uk/tax-company-benefits/overview

With regard to the medical insurance, were you not given full details in the information provided by the employer when you joined?

Lukeybaby86

I looked into that already and was told I'm not eligible. Got the impression they didn't back down on decisions for anyone and felt like they thought I was a scrounger trying to get out of paying just because I didn't want to.

And my old company blagged it too, I imagine when they have over a thousand managed properties, they probably get some kind of tax break on it too, and if they suddenly had to pay all that it would be a crippling blow for them.

MDMD

There is a process where employer errors are concerned and it can be that an employer is pursued:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/366615/employer-errors-deduction-paye.pdf

jimmo

Its quite a few years since I was involved in this type of work but the principles are that as a pub manager you are exempt from tax on the accommodation provided by your employer but you are chargeable to tax if your employer pays any bills which are personal to you such as heat and light.
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim11521
If, as seems to be the case here, your employer has failed to declare the correct amount of taxable benefits, the legal position is that you remain liable for the tax due on the benefits you received and your employer is liable to a penalty for making an incorrect Return (your P11D)
From memory, in my days the maximum penalty was £3,000 for each incorrect P11D but we always gave the employer the opportunity to “voluntarily” make good the tax lost as an alternative to each employee facing a tax liability and the employer facing a penalty.
In my experience absolutely every employer took the voluntary option but it seems that your employer has not. That, I am afraid, leaves you with a tax bill which you will have to face.
Moving away from the direct tax issues your employer certainly seems to have let you down by landing you with a tax bill that you did not expect but that is nothing to concern HMRC.
FWIIW my, absolutely non-expert view is that compensation is all about putting you back to the situation you would have been in if your employer had not made mistakes. You would have been liable to the tax on your benefits in any event so all you seem to have potentially lost is any interest HMRC charge you.