Tax Refund following Redundancy

Mountain_Biker

I was made redundant from my job at the end of March 2019.  My last day of work was 29 March 2019 and my March salary was paid on that day.  The redundancy, pay-in-lieu of notice, a small back dated pay rise and holiday pay were paid to me on 30 April.  This is clearly stated on the April pay slip. My P45 dated 26 April correctly states my leaving date as 29 March. (The delay was caused by the fact I missed March payroll due to not getting a settlement agreement signed off until 28 March.)  I paid £1321 income tax.  Currently I am a full-time student and will not be earning any taxable income between now and the end of this tax year.  My only income this year has been £877.21 of Job Seekers Allowance.

A few weeks ago I applied online for a refund of the £1321 tax, but received a letter today saying:  "We're not able to send you any money for the year claimed.  This is because no tax was deducted from your income in the current tax year."  When I telephoned the call centre they were adamant that I had not paid any income tax this year.  They said something about having reconciled all their payments. I am a little confused and hope some one can help.  I thought HMRC operated on a "receipts" basis.  The money was received in this tax year as shown on my pay slip and bank statement.

Dazed_and_C0nfused

Your employer has unwittingly confused matters.

The redundancy, pay-in-lieu of notice, a small back dated pay rise and holiday pay were paid to me on 30 April.  This is clearly stated on the April pay slip. My P45 dated 26 April correctly states my leaving date as 29 March. 

You appear to be saying your P45 is dated in a different tax year to the tax year the pay (and tax) on the P45 relates to.

I think the only way you can resolve this is to write to HMRC with a photocopy of your P45* and explain in plain English what has happened.  

*employers long since stopped sending a copy of P45's to HMRC.

There is no reason they cannot then sort out any tax refund due. 

jimmo

Dazed_and_C0nfused said:

Your employer has unwittingly confused matters.

The redundancy, pay-in-lieu of notice, a small back dated pay rise and holiday pay were paid to me on 30 April.  This is clearly stated on the April pay slip. My P45 dated 26 April correctly states my leaving date as 29 March. 

You appear to be saying your P45 is dated in a different tax year to the tax year the pay (and tax) on the P45 relates to.

I think the only way you can resolve this is to write to HMRC with a photocopy of your P45* and explain in plain English what has happened.  

*employers long since stopped sending a copy of P45's to HMRC.

There is no reason they cannot then sort out any tax refund due. 

Has the employer followed the correct PAYE procedure? RTI is long after my time but I would have thought that the P45, which correctly gives the date of leaving as 29 March, should show the pay and tax to 29 March only.

Then, the payment on 30 April should have been recorded as a payment after leaving paid in 2019/20, have been taxed appropriately (code 0T mnth1). No P45 should have been issued but details of the pay and tax given to the employee in a letter.

It also seems to me likely that the employer has incorrectly recorded the 30 April 2019 payment as if it were in 2018/19.

If that is the case there is a real danger that HMRC will advise the OP to get the employer to change their  PAYE records.

Dazed_and_C0nfused

Obviously if would help if the op could clarify what pay and tax figures were on the P45 but from what they posted I had assumed that the P45 included details of the payment made in April.

CWG2 has this to say,

1.14 Standard payments made when, or after, an employee leaves
For the purposes of this guidance, ‘standard’ payments mean such items as:

• the final payment of salary or wages

• holiday pay

• week-in-hand payments

• bonuses

It does not mean additional one-off payments such as retirement, redundancy, lump sums and so on, these payments are dealt with in section 2.
It also does not mean arrears of pay such as those arising from National Minimum Wage or equal pay reviews. These payments should be dealt with in accordance with the guidance in section 1.19.
PAYE and National Insurance contributions deductions are due on any standard payments you make to employees when they leave or after they have left. The payments should be submitted on the FPS along with the year to date figures.
If the payment is made in a later tax year to the one in which the employee left, an FPS is required in the later tax year for the tax period that payment is made. The year to date figures on the FPS should reflect only that payment.
For PAYE purposes
If you’ve already given an employee a form P45 you should deduct PAYE using code 0T for England and Northern Ireland, S0T for Scotland and C0T for Wales (non-cumulatively on a week 1 or month 1 basis) using the normal pay period for the employee (for example, monthly or weekly), at the time you make the payment. This payment should be submitted on an FPS.
Payments in connection with employment related securities, including cash payments arising from those securities, made to an employee after leaving should also be taxed using code 0T for England and Northern Ireland, S0T for Scotland and C0T for Wales (week 1 or month 1 basis non-cumulatively).
In such cases, you should provide the employee with documentary confirmation of the payment (for example, by letter, payslip or other printed/printable document) giving the following details:

• the date of the payments

• the taxable amount of each payment

• the amount of PAYE tax deducted from each payment

• confirmation that the payment is a post-leaving payment

Include the details, set the ‘Payment after leaving’ indicator and show the original date of leaving on the FPS when you make the payment. You must not give the employee another form P45.

Dazed_and_C0nfused

And for redundancy,

For PAYE purposes
Where no tax is due (because the payment is not taxable or the payment is a ‘taxable on amounts over £30,000’ payment below this limit) do not include in gross pay on your employee’s payroll record.
Where tax is due (because the payment is taxable in full or the payment is a ‘taxable on amounts over £30,000’ payment above this limit), and you make the payment to the employee:

• when or before the employee leaves, include the taxable amount

• in gross pay on the employee’s payroll record and operate PAYE in the normal way

• on the FPS

• complete a form P45 to give to the employee

• after the employee leaves

• include the taxable amount in gross pay on the employee’s payroll record for the tax week or month number in which you make payment

• enter code 0T as the amended code on the employee’s payroll record

• include the details, set the ‘payment after leaving’ indicator and show the original date of leaving on the FPS when you make the final payment

• operate PAYE by using code 0T (on a week 1 or month 1 basis)

• do not issue a further form P45. Instead give the employee a letter showing the date of the payment, the gross amount, and the PAYE tax you’ve deducted, and confirmation that the payment is a post-leaving payment

  
  

Mountain_Biker

Thank you both for taking the time and trouble to reply to my post.
The figures on the P45 issued to me last April are: Total pay to date £5908.22 and £1321 Total tax to date.  
(The £5908.22 consists of £164.76 salary, £522.14 for holiday not taken and £5221.32 for pay in lieu of notice.)

Dazed_and_C0nfused

So the P45 does have the date from one tax year and the income from another?

Mountain_Biker

My leaving date is given correctly as 29/03/2019. 
The P45 is dated 26/04/2019 Month number 1.

Dazed_and_C0nfused

I think my original response is the best course of action then.

No doubt your employer has filed this information under their Real Time Information reports but the conflict between the tax year your leaving date relates to and the tax year your payment relates to all within one report has no doubt confused HMRC.

Would be interested to know the outcome in due course.

Mountain_Biker

Thanks again for your interest in my question. I will follow your suggestion and let you know the response I get from HMRC.

Mountain_Biker

As suggested I sent a letter to HMRC at the end of February together with copies of my P45, final payslip and April bank statement. (I am not sure whether the latter two documents were necessary.)
Today a cheque for £1321 arrived which I was very pleased about.