Nightmare - Pensions and HMRC

Gwen54

Hi, can anyone advise on this query for me.
I’m retiring in December from my job of 15 years, my employer received a letter from HMRC regarding my underpayment of NI from 2014-2019 and in the letter it mentions they have to pay over £9,000.
It seems that when I was 60 the payroll company advised my manager to change the code from A to C which she did therefore for those 5 years I haven’t paid any NI.
As I was 60 I naturally assumed that I had paid my full quota of NI contributions, my manager didn’t advise me at the time and they are now saying I have to pay this £9,000.
In my opinion it’s the payroll company who is at fault as at that time they hadn’t updated they’re software.
So can anyone advise me is this correct that I should pay this money (which I don’t have).
Any advice would be welcome.
Thanks
Gwen

JoeCrystal

Gwen54, it might be worth posting a new thread since your post is nothing to do with OP's topic. My first thought on your post is that you do not have an excuse as it is your responsibility to make sure that you are paying the right taxes and NIs. So you will have to pay it, one way or another.

Besides, you stop paying NI at work when you reach State Pension age, not when you reach 60. You shouldn't assume anything when it comes to something like that issue!

xylophone

Are you soon to become eligible for state pension?

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

Re NI

https://www.gov.uk/employee-reaches-state-pension-age

http://www.numeruspayrollservices.co.uk/news/age-exception-certificates-ca4140/

Clearly you had not reached SPA in 2014 - the payroll company must have been aware of the change in SPA for women for many years before that.

As I was 60 I naturally assumed that I had paid my full quota of NI contributions,

Why, when you had not reached SPA?

nigelbb

xylophone wrote: »

Are you soon to become eligible for state pension?

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

Re NI

https://www.gov.uk/employee-reaches-state-pension-age

http://www.numeruspayrollservices.co.uk/news/age-exception-certificates-ca4140/

Clearly you had not reached SPA in 2014 - the payroll company must have been aware of the change in SPA for women for many years before that.



Why, when you had not reached SPA?

I don't think that it's such an unreasonable assumption to make. People know that you need 39 years or 30 years or 35 years or whatever contributions to earn a full pension so why wouldn't you stop paying when you have right number of contributions? Especially if your payslip shows that you are no longer paying NI. When it comes to deductions for income tax & NI you normally assume that your employer is doing it correctly.

Initially I thought that the employer was miffed because they were going to have to pay 5 years of contributions too but to quote from the link provided

Change their National Insurance category letter to ‘C’ in your payroll software - this means you’ll stop deducting National Insurance from their pay. You still need to pay employer’s contributions for them.

I hadn't realised that the employer continues paying their NI contributions after the employee reaches SPA.

In my case the problem was the other way round & it took a couple of months before they stopped deducting NI after I reached SPA.

xylophone

I don't think that it's such an unreasonable assumption to make. People know that you need 39 years or 30 years or 35 years or whatever contributions to earn a full pension so why wouldn't you stop paying when you have right number of contributions?

The OP seems to have been under the impression that age 60 (former female SPA) was the key - since she must have known that she had not reached SPA, one would have thought that she might have checked?

And apart from that, having paid the number of years for a full SP has never correlated with being able to stop paying it if still employed and earning the relevant amount?

For example, a woman born in say 1948 might have started work at 15, never married or had children and reached 39 full years when she was 54 - she would not have expected to stop paying contributions?

All that said, there does seem to have been a degree of mismanagement by her employer - see links.

The employer had a responsibility to ensure that the correct payments were made on behalf of the employee - I imagine that the OP/the company will between them have to reach an accommodation with HMRC.

nigelbb

xylophone wrote: »

The OP seems to have been under the impression that age 60 (former female SPA) was the key - since she must have known that she had not reached SPA, one would have thought that she might have checked?

And apart from that, having paid the number of years for a full SP has never correlated with being able to stop paying it if still employed and earning the relevant amount?

For example, a woman born in say 1948 might have started work at 15, never married or had children and reached 39 full years when she was 54 - she would not have expected to stop paying contributions?

All that said, there does seem to have been a degree of mismanagement by her employer - see links.

The employer had a responsibility to ensure that the correct payments were made on behalf of the employee - I imagine that the OP/the company will between them have to reach an accommodation with HMRC.

NI contributions are income tax on earned income for those below SPA. What would the outcome be if the employer ignored the employee's notice of coding & did not deduct PAYE correctly for five years?

Gwen54

Thanks for your comment, surely this is the responsibility of my employer who should’ve let me know not wait 5 years down the line

Gwen54

Hi, I am now of state pension age and yes I have been told what I will receive

xylophone

What would the outcome be if the employer ignored the employee's notice of coding & did not deduct PAYE correctly for five years?

According to HMRC https://www.gov.uk/government/publications/paye-employer-errors-in-deduction

If you think that your employer or pension payer has made a mistake in the deduction of PAYE tax which has resulted in the issue of a Tax Calculation (P800) to you, then in some limited circumstances you may not have to pay the underpayment caused by that error.
The circumstances are that your employer or pension payer did not take reasonable care to operate PAYE and the error was not made in ‘good faith’. In describing a ‘failure to take reasonable care’, this means failing to follow proper instructions to deduct PAYE tax from your pay or by failing to use Tax Code notices issued to them. Not made in ‘good faith’ means that an employer or pension payer may have known that they were not deducting the right amount of tax from you but took no action to correct their mistake.

xylophone

Thanks for your comment, surely this is the responsibility of my employer who should’ve let me know not wait 5 years down the line

Did you not think to check the NI position when you realised that you had stopped paying at 60 even though this was no longer your SPA?

That said, there was clearly mismanagement since payroll, too, failed to check.

There is this

http://www.fireflypayroll.com/blog/employers-may-be-liable-for-under-deductions-of-paye-and-nic-s-of.html

but you/your employer/HMRC may be involved in a long debate.....