HMRC Investigation time limit

Hoenir

[Deleted User] said:

Hoenir said:

[Deleted User] said:

JamesRobinson48 said:

In the circumstances I suggest that OP's partner would be well advised to share all the details with a local chartered accountant and follow their advice.

One can sort of see where the supposed £12k underpayment might possibly be coming from.  If total taxable income was £103K, then the top £3k of that is taxable at an effective marginal rate of 60% (given part withdrawal of Personal Allowance), and the next £50k at 40%.  So on those two top slices of income, the tax charge is:

(£3 * 60%) + (£50 * 40%) = ~ £22k tax 

We've been told that for some reason PAYE tax deductions on those same slices of taxable income were taken at only 20%, i.e.

(£3 + £50) * 20% = ~£10k tax

Difference between ~ £22k and ~ £10k is ~ £12k tax liability, i.e. not collected by PAYE so required to be paid by the taxpayer. All £ figures very approximate/rounded.

So just possibly, having declared all the income due through self-assessment, OP's partner somehow overlooked actually paying to HMRC the incremental income tax that was shown as due?

I know this doesn't exactly fit some of the circumstances which OP has disclosed. I mention it only as one possible explanation for an alleged £12k shortfall amount.

Exactly. On the withdrawal it is likely that the provider, as is customary, operated a BR code on the taxable withdrawal - all at 20%.

Is a BR tax code customary for pension withdrawls? 

Yes - or the emergency code, at least on the initial payment, as in this case. 

Thereafter, one would anticipate an amended code to be issued by HMRC. 

My thinking was an emergency code. BR is better suited to employment situtations,