Nightmare - Pensions and HMRC

nigelbb

xylophone wrote: »

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.

It looks like it might be a bit of a grey area. Applying the same rules to failure to deduct NI contributions the employer has certainly failed to take reasonable care but was the error made in good faith? The employer will presumably blame the payroll company but the female SPA hasn't been 60 since 2010 so if they were still getting this wrong in 2014 I think that the OP has got a legitimate grievance.

The OP has hopefully got her maximal pension without these last 5 years of contributions.

nigelbb

xylophone wrote: »

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.....

Re-reading the original post from Gwen54 it seems that it's her soon to be ex-employer who has had a letter from HMRC & it looks like it's the employer who is on the hook for the missing NI contributions. It appears that their only recourse is to try & reclaim from Gwen54 but as she has done nothing e.g. not lied about her age then I cannot see that they will have much luck. As she is retiring imminently the employer has little leverage in attempting to reclaim the £9K.

Ceme3000

Gwen54 You may find this article useful;

https://app.croneri.co.uk/topics/national-insurance/how-deal-overpayments-and-underpayments-nics

nigelbb

Ceme3000 wrote: »

Gwen54 You may find this article useful;

https://app.croneri.co.uk/topics/national-insurance/how-deal-overpayments-and-underpayments-nics

That article is inaccessible behind a paywall.

Ceme3000

nigelbb wrote: »

That article is inaccessible behind a paywall.

Thanks Nigel. I realise now I can see it on my tablet browser but not on Windows laptop. In summary it says;

Where an employer deducts fewer National Insurance contributions than should have been deducted, an underpayment exists. The employer is liable to ensure that an underpayment is paid to HM Revenue & Customs Banking Operations (accounts office) as soon as the underpayment is established and/or the liability is established.

An employer is entitled to recover any underpayment from an employee under the general recovery rules (Social Security Contributions and Benefits Act 1992 Sch.1, para.3(3)) as long as certain criteria apply (Social Security (Contributions) Regulations 2001 Sch.4, para.9(3)-(5)):

the recovery is made by the end of the tax year following the one in which the underpayment first arose

the employer does not recover in additional contributions more than the employee’s normal contributory payment. For example, if an employee’s normal contribution due is £48.80 in a particular tax week, no more than an additional £48.80 can be recovered (£97.60 in total).

Underpayments of contributions which remain non-recovered at the end of the tax year following, or that are discovered after the tax year has ended, are the total liability of the employer. No further recovery is allowed.

nigelbb

Ceme3000 wrote: »

Thanks Nigel. I realise now I can see it on my tablet browser but not on Windows laptop. In summary it says;

Where an employer deducts fewer National Insurance contributions than should have been deducted, an underpayment exists. The employer is liable to ensure that an underpayment is paid to HM Revenue & Customs Banking Operations (accounts office) as soon as the underpayment is established and/or the liability is established.

An employer is entitled to recover any underpayment from an employee under the general recovery rules (Social Security Contributions and Benefits Act 1992 Sch.1, para.3(3)) as long as certain criteria apply (Social Security (Contributions) Regulations 2001 Sch.4, para.9(3)-(5)):

the recovery is made by the end of the tax year following the one in which the underpayment first arose

the employer does not recover in additional contributions more than the employee’s normal contributory payment. For example, if an employee’s normal contribution due is £48.80 in a particular tax week, no more than an additional £48.80 can be recovered (£97.60 in total).

Underpayments of contributions which remain non-recovered at the end of the tax year following, or that are discovered after the tax year has ended, are the total liability of the employer. No further recovery is allowed.

It looks like excellent news for Gwen54 & it's as I surmised that the employer is responsible for paying HMRC the missed contributions.

This new bit of information shows that the employer is only entitled to recover from the employee for at most the previous tax year April 2018-2019. Given that she is soon to be an ex-employee if they don't claw back from her salary before she leaves then they will be SOL. Even if they were to immediately start deducting arrears for the remainder of her employment they cannot deduct an extra sum greater than her normal NI contributions so if she is retiring in November they could only claim back seven months contributions.

An even more generous Interpretation of the regulation would be that as recovery must be made by the end of the tax year following the one in which the underpayment first arose that as the underpayment first arose 5 years ago they have no chance of recovery!

nigelbb

nigelbb wrote: »

It looks like excellent news for Gwen54 & it's as I surmised that the employer is responsible for paying HMRC the missed contributions.

This new bit of information shows that the employer is only entitled to recover from the employee for at most the previous tax year April 2018-2019. Given that she is soon to be an ex-employee if they don't claw back from her salary before she leaves then they will be SOL. Even if they were to immediately start deducting arrears for the remainder of her employment they cannot deduct an extra sum greater than her normal NI contributions so if she is retiring in November they could only claim back seven months contributions.

An even more generous Interpretation of the regulation would be that as recovery must be made by the end of the tax year following the one in which the underpayment first arose that as the underpayment first arose 5 years ago they have no chance of recovery!

It's even better than I thought. I looked back through the thread & Gwen54 is already past state pension age (thus not paying NI) & retiring in December so the employer only has four months to reclaim & cannot claim more extra NI than what Gwen54's normal contributory payment would be which as she is past state pension age is zero!