Underpaid tax [BIK] and owed money from employer

sophieweston1

Hello 

Wondering if anyone can share any advice around underpaid tax and a complex issue regarding my current employer and owed funds. 

I currently work for a company based in Europe - they don't have a UK based HR department and from what I know, all tax/ payroll is done through a 3rd party partner. 

I started the company in June 2022 and was due a company car. When I started, I was given what I was told was an interim rental car until a company car became available. I ended up having the rental car for over a year until this was sorted. During that period I was given no choice of car and given no documentation, advice, instructions etc. in regards to tax and had no idea I needed to pay BIK tax on a rented vehicle. This also transpired to be a very expensive car when it came to tax, and way above my pay grade...

In September 2023, when I was given a company car, I advised HMRC of this change and my tax code was updated. However, later in the year I was advised that I owed 3.7k in tax in tax year 22-23. It transpired that my company hadn't processed the correct information on a P46/ new starter form at the start of my employment, hence being under taxed. They've admitted this error in an email trail I have from the HR department.

As soon as I was given the bill, I contacted HR for advice. They didn't commit to paying the full bill of the tax however, they were willing to give me 3.4k compensation which was apparently the difference between the expensive rental car and the company car they were meant to give me upon employment. They insisted on paying me this via a bonus as part of my pay check which meant I would get heavily taxed, but they said they'd take that into consideration and pay me more, so I would get the full amount of 3.4k. On pay day in January, I received this money but not the full amount - I was just over 1k short. The company HR department have since been ignoring all emails, and haven't rectified the problem. Although I have a call with the HR team later today to discuss.

I have 2 issues I need advice on:

1. Should I pay this tax bill at all, as it was due to employer error? I've read conflicting information and HMRC haven't been helpful over the phone. They understandably just want the full amount paid. I've read I can argue employer error and need to write a letter to HMRC to do so, but I've already paid of 2k of the underpaid tax from the compensation I was given in Jan. 

2. If I do, I am still at least 1k short from what my company promised - I have this in a written email. However, HR are now not responding - I want to leave the company but I'm afraid I'll never get the funds. Is this something I should open up with a small claims court?

I also think I would've underpaid tax from April 23-Sep 24 before I had the company car - I won't know this until later in the year, if I leave, will I be able to argue this too?

Thanks so much for any advice! 

mybestattempt

I can't see why HMRC should get involved as you're correctly assessed on the benefit in kind for the car made available to you, not another car you would have preferred.

Your dispute is with your employer, you have incurred a higher tax bill than you expected because of their actions, they've admitted this and already paid you something but not the amount they said they would.

You need to pursue your employer as they haven't honoured the full amount promised to you.

BoGoF

What did a free car provided by your employer constitute in your eyes?

Tax in a BIK is a personal liability and I don't see the 'employer error' argument having any traction. You should have been asking questions about the car and how it would be treated. You surely weren't expecting to have use of a 'free' vehicle without any tax implications?

sophieweston1

BoGoF said:

What did a free car provided by your employer constitute in your eyes?

Tax in a BIK is a personal liability and I don't see the 'employer error' argument having any traction. You should have been asking questions about the car and how it would be treated. You surely weren't expecting to have use of a 'free' vehicle without any tax implications?

I suppose a couple of things from my side: 
- I was only told about BIK tax on official company cars (from info of googling/ speaking to friends etc. not from my employer), and as this was a rented vehicle I naively didn't realise. This seems stupid now, as your comment suggests - but from someone who's never had to deal with this, I genuinely had no idea - a mistake I won't make again and has resulted in many sleepless nights 

- But it does seems crazy to me that a mistake that was made on the employer end (not filling out the correct information on my starter form/ p46 - I'm not even sure HR were made aware I had a company car until I complained about still having a rental directly to them) results in the entire responsibility being on the employee. Call me crazy to think that but I just can't believe they don't share any of the responsibility. 

Based on the above, I was quite happy with my employers resolution to pay me compensation on the difference between the expensive rental vehicle vs. the company car I should've had. However it's concerning me that I'm 2 months post receiving only 2/3 of the compensation and the employer isn't helping to get the rest to me and would like to know where I stand regarding this. 

Following call this afternoon they've put me directly in touch with their 3rd party payroll/ tax partner. I was pushing for a resolution from their side but it seems to me that they don't have a clue either and want to get it off their plate. 1k isn't a lot to a lot of people, but in this situation I really need the funds! 

Thanks,

sophieweston1

mybestattempt said:

I can't see why HMRC should get involved as you're correctly assessed on the benefit in kind for the car made available to you, not another car you would have preferred.

Your dispute is with your employer, you have incurred a higher tax bill than you expected because of their actions, they've admitted this and already paid you something but not the amount they said they would.

You need to pursue your employer as they haven't honoured the full amount promised to you.

Thanks for response! 

I've commented back, but update from this afternoons call was that the HR team were putting me in direct contact with their UK based payroll/ tax provider for advice. She's cc'd me in the email asking for advice from their side but hasn't committed to a resolution at this stage. 

Hoenir

sophieweston1 said:

 I was pushing for a resolution from their side but it seems to me that they don't have a clue either and want to get it off their plate. 

As an overseas entity with no UK operation there's no reason for them to understand UK tax law. I'd imagine that this issue has become a complete pain in the backside for them. As the budget for employing a UK operative has been blown apart.  Not only do you have a tax liability for the provision of a company car . Your employer will incur a Class 1a NIC charge as well. 

Savvy_Sue

Not at all uncommon for a payroll query to be passed to payroll for a response!

And it's sad, I know, but you are, as an individual, responsible for paying the correct tax, and there are tools available for helping you check that you have the right tax code. There's a few rare situations where the tab for employer mistake doesn't have to be picked up by the employee, but that's only where you can't reasonably be expected to have spotted the mistake.

You can of course ask for an instalment plan.

sophieweston1

Hoenir said:

sophieweston1 said:

 I was pushing for a resolution from their side but it seems to me that they don't have a clue either and want to get it off their plate. 

As an overseas entity with no UK operation there's no reason for them to understand UK tax law. I'd imagine that this issue has become a complete pain in the backside for them. As the budget for employing a UK operative has been blown apart.  Not only do you have a tax liability for the provision of a company car . Your employer will incur a Class 1a NIC charge as well. 

Well I disagree - although the companies head office are overseas, they have nearly 20 members of staff in the UK and other staff Internationally. It seems to me like they need a dedicated HR representative in the UK to deal with these kind of queries and other HR issues here

prettyandfluffy

OP, I think it would be a good idea to change your user name to something less easily identifiable on a public forum.

Hoenir

sophieweston1 said:

Hoenir said:

sophieweston1 said:

 I was pushing for a resolution from their side but it seems to me that they don't have a clue either and want to get it off their plate. 

As an overseas entity with no UK operation there's no reason for them to understand UK tax law. I'd imagine that this issue has become a complete pain in the backside for them. As the budget for employing a UK operative has been blown apart.  Not only do you have a tax liability for the provision of a company car . Your employer will incur a Class 1a NIC charge as well. 

Well I disagree - although the companies head office are overseas, they have nearly 20 members of staff in the UK and other staff Internationally. It seems to me like they need a dedicated HR representative in the UK to deal with these kind of queries and other HR issues here

For 20 people. A dedicated HR person seems excessive. At the outside you made no mention of their being a UK operation.  You presumably do have a UK line manager though.  Company cars have been taxed as a benefit for a very long time. There was probably an expectatation that you would have been aware of this fact. As there's little that can be provided to an employee tax free without being considered a benefit.