Employer refusing to update HMRC with correct tax information

NC41

Colleagues in 15 local authorise are struggling to claim back a tax refund (due to paying tax on back pay received in the wrong tax year). HMRC are telling us that our employers need to inform them of this issue but our employers are telling us that they are under no obligation to give HMRC this information. This has been going on since April of this year. What can we do?

Marcon

Probably easiest to do it yourself. See https://community.hmrc.gov.uk/customerforums/sa/c6f6b95f-fcfe-ee11-a81c-002248c82e24

Hoenir

If there was no legal obligation for your employer to give you the pay rise in the first place, then the amount would be fully taxable in the year that it's received, rather than in any earlier tax year.

mybestattempt

NC41 said:

Colleagues in 15 local authorise are struggling to claim back a tax refund (due to paying tax on back pay received in the wrong tax year). HMRC are telling us that our employers need to inform them of this issue but our employers are telling us that they are under no obligation to give HMRC this information. This has been going on since April of this year. What can we do?

The employer are correct they cannot reallocate back pay to an earlier tax year.

Earnings are taxable on receipts basis:

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42270


I'm afraid the HMRC Community Forum is not a reliable source for correct information/advice. In fact it's terms and conditions confirm it is not a substitute for HMRC official guidance.

molerat

Local authority employee = unions, is that not what you pay your subs for ?

But as above, inform HMRC of the breakdown yourself.

Marcon

mybestattempt said:

NC41 said:

Colleagues in 15 local authorise are struggling to claim back a tax refund (due to paying tax on back pay received in the wrong tax year). HMRC are telling us that our employers need to inform them of this issue but our employers are telling us that they are under no obligation to give HMRC this information. This has been going on since April of this year. What can we do?

The employer are correct they cannot reallocate back pay to an earlier tax year.

Earnings are taxable on receipts basis:

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42270


I'm afraid the HMRC Community Forum is not a reliable source for correct information/advice. In fact it's terms and conditions confirm it is not a substitute for HMRC official guidance.

I agree - but in this case OP seems to have had it confirmed direct by HMRC that this can be done if the employer provides the necessary breakdown of information, which is why I thought the link might be useful. Nothing to lose by giving it a go, surely? At worst the answer will be 'can't be done'.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye70023#postrti suggests it is possible:

Employer deducts tax in the current tax year

Some employers will not contact you to agree a settlement because they have paid the arrears as one lump sum in the current tax year and deducted PAYE. This may give rise to higher rate liability on employees who are basic rate taxpayers.

If an employee contacts you before the end of the tax year claiming to have paid too much tax on the arrears and asking that the arrears are taxed on the correct basis you should

• Set the Inhibit Automatic Reconciliation signal so that the liability can be reviewed at the end of the year
• Make a Contact History note ‘Inhibit Automatic Reconciliation signal set arrears of pay case’
• The estimated pay used in coding calculations will be incorrect due to the lump sum payment on the FPS. This estpay cannot be overwritten and may result in tax codes that will cause hardship for the customer in year. If this is the case, set the Manual code indicator & issue manual codes through SEES.

Tell the customer that the matter cannot be reviewed until the end of the year but their record has been flagged for an automatic review at the earliest opportunity.

Ask the customer to

• Send you their P60 for the relevant year as soon as they receive it
• Confirm the total payment and the amounts applicable to each tax year it covers
• Provide copies of any documents the employer has given them in respect of the payment

mybestattempt

Marcon said:

mybestattempt said:

NC41 said:

Colleagues in 15 local authorise are struggling to claim back a tax refund (due to paying tax on back pay received in the wrong tax year). HMRC are telling us that our employers need to inform them of this issue but our employers are telling us that they are under no obligation to give HMRC this information. This has been going on since April of this year. What can we do?

The employer are correct they cannot reallocate back pay to an earlier tax year.

Earnings are taxable on receipts basis:

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42270


I'm afraid the HMRC Community Forum is not a reliable source for correct information/advice. In fact it's terms and conditions confirm it is not a substitute for HMRC official guidance.

I agree - but in this case OP seems to have had it confirmed direct by HMRC that this can be done if the employer provides the necessary breakdown of information, which is why I thought the link might be useful. Nothing to lose by giving it a go, surely? At worst the answer will be 'can't be done'.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye70023#postrti suggests it is possible:

Employer deducts tax in the current tax year

Some employers will not contact you to agree a settlement because they have paid the arrears as one lump sum in the current tax year and deducted PAYE. This may give rise to higher rate liability on employees who are basic rate taxpayers.

If an employee contacts you before the end of the tax year claiming to have paid too much tax on the arrears and asking that the arrears are taxed on the correct basis you should

• Set the Inhibit Automatic Reconciliation signal so that the liability can be reviewed at the end of the year
• Make a Contact History note ‘Inhibit Automatic Reconciliation signal set arrears of pay case’
• The estimated pay used in coding calculations will be incorrect due to the lump sum payment on the FPS. This estpay cannot be overwritten and may result in tax codes that will cause hardship for the customer in year. If this is the case, set the Manual code indicator & issue manual codes through SEES.

Tell the customer that the matter cannot be reviewed until the end of the year but their record has been flagged for an automatic review at the earliest opportunity.

Ask the customer to

• Send you their P60 for the relevant year as soon as they receive it
• Confirm the total payment and the amounts applicable to each tax year it covers
• Provide copies of any documents the employer has given them in respect of the payment

I think, if you read that PAYE guidance in detail, it relates to arrears of pay which an employee was entitled to in a closed tax year.

It's perhaps arguable, but my view is that an employee becomes entitled to back pay when the pay rise is agreed and paid, not the date the pay rise is effective from:

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42290

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42292

Marcon

mybestattempt said:

Marcon said:

mybestattempt said:

NC41 said:

Colleagues in 15 local authorise are struggling to claim back a tax refund (due to paying tax on back pay received in the wrong tax year). HMRC are telling us that our employers need to inform them of this issue but our employers are telling us that they are under no obligation to give HMRC this information. This has been going on since April of this year. What can we do?

The employer are correct they cannot reallocate back pay to an earlier tax year.

Earnings are taxable on receipts basis:

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42270


I'm afraid the HMRC Community Forum is not a reliable source for correct information/advice. In fact it's terms and conditions confirm it is not a substitute for HMRC official guidance.

I agree - but in this case OP seems to have had it confirmed direct by HMRC that this can be done if the employer provides the necessary breakdown of information, which is why I thought the link might be useful. Nothing to lose by giving it a go, surely? At worst the answer will be 'can't be done'.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye70023#postrti suggests it is possible:

Employer deducts tax in the current tax year

Some employers will not contact you to agree a settlement because they have paid the arrears as one lump sum in the current tax year and deducted PAYE. This may give rise to higher rate liability on employees who are basic rate taxpayers.

If an employee contacts you before the end of the tax year claiming to have paid too much tax on the arrears and asking that the arrears are taxed on the correct basis you should

• Set the Inhibit Automatic Reconciliation signal so that the liability can be reviewed at the end of the year
• Make a Contact History note ‘Inhibit Automatic Reconciliation signal set arrears of pay case’
• The estimated pay used in coding calculations will be incorrect due to the lump sum payment on the FPS. This estpay cannot be overwritten and may result in tax codes that will cause hardship for the customer in year. If this is the case, set the Manual code indicator & issue manual codes through SEES.

Tell the customer that the matter cannot be reviewed until the end of the year but their record has been flagged for an automatic review at the earliest opportunity.

Ask the customer to

• Send you their P60 for the relevant year as soon as they receive it
• Confirm the total payment and the amounts applicable to each tax year it covers
• Provide copies of any documents the employer has given them in respect of the payment

I think, if you read that PAYE guidance in detail, it relates to arrears of pay which an employee was entitled to in a closed tax year.

It's perhaps arguable, but my view is that an employee becomes entitled to back pay when the pay rise is agreed and paid, not the date the pay rise is effective from:

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42290

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42292

Hope OP tries it and reports back - as you say, it's 'arguable' (which seems to be the case with most things tax-related...).