Lloyds ex-employee share problem leading to tax code issues

kg87

I used to work for Lloyds Bank for 3 years up until July this year when I left for a promotion at another company. At the time that I left, I had around £7000 worth of Lloyds shares that I'd invested in through employee share schemes which were tax-efficient, however as per the rules, because I hadn't held any of these shares for 5 years or more, they were subject to tax and NI payments at the moment I chose to leave. So I had to make a choice of forfeiting all of my shares and getting all my money back minus the tax owed, or keeping the shares and paying the tax owed on them, and them issuing me with a share certificate. In the hope that it will be worth it in the long run, I chose the latter.

In August, I was notified that the amount owed in tax to proceed with this was around £2360 and as requested, I sent Equiniti (who manage the shares stuff for Lloyds) a bankers draft for the amount owed, as laid out in their own instructions. Remarkably, this archaic way of sending them money meant they weren't even able to ever let me know when they'd received the draft and despite me calling them a couple of time over the coming month to chase it, I was constantly told they were an inbound callcentre so couldn't check but they'd note it on my account that I'd chased it and that someone would be in touch.

I never heard from anyone until September time when my share certificate arrived in the post and I had assumed that this meant they've received the bankers draft, issued the share certificate as a result and that's it. However, at this point, my tax code suddenly changed and the pay I was receiving from my new employers suddenly dropped by £200 a month for a couple of months. I didn't think too much of it in the first instance and thought it would all come out in the wash at the end of the tax year, I contacted HMRC about it this week just to check and was floored when they told me that the reason for the tax code change was because Lloyds had informed HMRC that I had been paid around £7000 (the exact amount I had in shares) in income in October 2021, with the amount payable in tax and national insurance on that sum adding up to exactly what they said I'd owed in tax for keeping the shares. After explaining the situation to HMRC, they agreed that this was classed as income when it shouldn't be but I'd need to take it up with Lloyds to sort it.

When I've followed up with Lloyds payroll, they have confirmed they have it on record saying the same thing and that they think they must have done this because they never actually received the bankers draft to for some reason went down this route instead, but never actually informed me. They're now investigating it and said I should get a response soon but I'm just baffled as to how they can get away with just declaring a transferring of shares to me as income in this way when it clearly wasn't cash I received in my account and they didn't even think to contact me to say they hadn't received the bankers draft. I've taken this up with my bank as well who are now tracing the bankers draft to see if anyone has made an attempt to cash it and if not, they'll return the funds.

Am I missing anything here or am I on the right track with the fact that it's bang out of order for Lloyds to have told HMRC that they've paid me an amount classed as 'income' when it clearly is not income at all? I want to take this complaint much further as it seems completely out of order and I just can't believe in this day and age their process not only includes only being able to pay by cheque or bankers draft, but at no point throughout did they seek to contact me to chase the fact that they hadn't received it. Thanks in advance for anyone who can provide further advice and guidance on this.

FatherTireseus

It may not have been ‘income’ in the sense of a monetary amount paid to you via payroll but there are plenty of things which are taxable but not paid in monetary amounts.  Company cars, fuel cards, medical insurance provided by an employer; monetary values are assigned to these benefits and counted as income for tax purposes.  Assigning shares with a monetary value to you may not have been ‘income’ as you see it, but it was something that you derived a monetary benefit from and so tax was due on it.  

Years ago I was given some share options in the company I worked for and when they matured I was required to pay tax on them before they were issued to me, although the choice I was given was to get all the shares and pay a monetary amount to cover the tax; or to accept a proportion of the shares, with a certain amount being sold to cover the tax due.  Not exactly the same circumstances as you, but the principle of paying tax on shares allocated is the same.

It seems to me your best bet is to keep following up with Lloyds as to the missing banker’s draft.  And yes I agree it seems a particularly archaic way of doing things in this day and age!