HMRC increasing tax due to spurious payment from ex-employer

Sapindus

This is a bit of a weird one as my son has rung me and he isn't always very good at explaining things. But he has had a letter from HMRC saying he owes them £1k plus in tax due to having been paid £15k in the last tax year by an employer which he left in 2021 or 2022.  He left because the employer went out of business.
He is panicking wondering how is he supposed to prove he has NOT been paid by the employer?
Is this some sort of money laundering scam where someone sets up a bank account in someone else's name?

SiliconChip

The first step should be to ring HMRC to confirm that the letter is genuine, best time of day is 8am when the lines open and the wait is shortest (but as we're approaching the self assessment deadline lines are likely to be pretty busy at any time).

DRS1

He could check his personal tax account to see if that sheds any light on it.

Sapindus

He says he looked in his government gateway account but it didn't seem to help.  I think it must be genuine as it says they are going to adjust his tax code to make up the shortfall - I'd guess if it was a fake letter they would actually be demanding a payment over the phone.
He's going to see his stepmum tomorrow who is a business manager so she may be able to help him.
I'm just struggling with how he can prove it's not him if his ex-boss has set up a bank account in his name as a "ghost employee". Or maybe it isn't as bad as that and the ex-boss just has him as a ghost employee but the money is being paid into the boss's own account and it'll all be clear when HMRC look into it.

penners324

He needs to check his hmrc account carefully. Including the tax code.

Then call hmrc.

You're suggesting fraud by the ex employer

Grumpy_chap

Sapindus said:

  He left because the employer went out of business.

Was the former employer a Ltd Co which has been wound up or a Sole Trader that simply ceased trade?

Sapindus

Grumpy_chap said:

Sapindus said:

  He left because the employer went out of business.

Was the former employer a Ltd Co which has been wound up or a Sole Trader that simply ceased trade?Grumpy_chap said:

gov.uk says:
Company status

Active — Active proposal to strike off

Company type

Private limited Company

I never bothered to check before.  

eastcorkram

Surely he'd know whether or not someone has paid him £15,000. 

Sapindus

eastcorkram said:

Surely he'd know whether or not someone has paid him £15,000. 

Yes, he knows that this person/company has not paid him £15k.  The question is how does he prove to HMRC that he hasn't received £15k.

I suppose what I'm hoping by coming here is that someone may have experienced similar and know how it gets cleared up?

ProcessMatters

HMRC don’t expect him to “prove a negative” in the way you’re thinking.

What matters is whether there’s a PAYE record showing income paid to him. If an employer has reported earnings that were never paid, HMRC will ask the employer to evidence payment (FPS submissions + bank trail).

The practical steps are:

check the PAYE employment record in his HMRC account, then call HMRC and state he disputes the employment/income. HMRC will open an employer compliance check and put the tax code adjustment on hold while they investigate.

If the employer can’t evidence payment to his account, HMRC remove the income — this is a known scenario with incorrect FPS or misuse of details.

Sapindus

Update on this.  We have now managed to check his PAYE record.

22/23 taxable income 15k paid £1260 tax
23/24 shows employment end date April 2025 but no income
24/25 same

Company is showing as accounts overdue and waiting to be struck off.

Possibly slightly complicating this is that the pension provider kept sending him letters saying they had reported the boss for not paying into the pension, and he finally told them he wasn't working for that employer any more in August last year.  

He is going to ring HMRC tomorrow.