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  • FIRST POST
    • xtheonex
    • By xtheonex 16th May 18, 10:33 PM
    • 6Posts
    • 0Thanks
    xtheonex
    Employer failed to deduct enough income tax...
    • #1
    • 16th May 18, 10:33 PM
    Employer failed to deduct enough income tax... 16th May 18 at 10:33 PM
    Hi
    I wonder if anyone has any experience with my situation.

    The simple version is - a previous employer didn't deduct enough income tax from me and now HMRC want me to pay it.

    The long version is - I recently started my own company and as such the HMRC obviously requires me to submit a self assessment tax return for the 2017-2018 tax year.
    In the 2017-2018 tax year I started working for Company 1 and left that company in approx June 2017.
    I then started working for Company 2 and left that company in March 2018.
    I then started my own company in April 2018.
    When filling out my tax return the self assessment calculation showed I owe almost 1000 in underpaid tax for that period.
    For both Company 1 and Company 2 I was in the higher tax bracket and I have checked both P45s and from a rough calculation it appears that Company 1 deducted approx 13.5% of my income for tax where as Company 2 deducted approx 23% for tax so it's clear (to me at least) that Company 1 is to blame for this?

    My question I guess is do I have any legal recourse to get Company 1 to pay the tax?
    Now obviously I know the tax should have been paid by me in the first place but one would assume that as I have no control over how their payroll calculated my pay / tax I shouldn't be responsible for HMRC now demanding nearly 1000 in outstanding tax?

    Does anyone have any experience / insight to help answer my question?

    Thanks in advance,
    Dave
Page 1
    • Gavin83
    • By Gavin83 16th May 18, 10:54 PM
    • 5,316 Posts
    • 8,730 Thanks
    Gavin83
    • #2
    • 16th May 18, 10:54 PM
    • #2
    • 16th May 18, 10:54 PM
    You said it yourself, the tax should have been paid by you originally. You won't be any worse off in paying it and you'll be considered at least as responsible to ensure you're paying the correct tax. Basically you need to pay this and you have no claim against your original company.
    • Dazed and confused
    • By Dazed and confused 16th May 18, 10:58 PM
    • 2,926 Posts
    • 1,426 Thanks
    Dazed and confused
    • #3
    • 16th May 18, 10:58 PM
    • #3
    • 16th May 18, 10:58 PM
    Have you checked that you actually completed the return correctly?

    You are definitely making too big an assumption about employer 1 being the source of the problem.

    What tax code were you issued with for 2017:18 and did each employer use this code number?

    You really need to post some actual income details for anyone to give more meaningful help. The Self Assessment calculation would also really be needed.
    • Takeaway_Addict
    • By Takeaway_Addict 17th May 18, 7:02 AM
    • 5,871 Posts
    • 6,816 Thanks
    Takeaway_Addict
    • #4
    • 17th May 18, 7:02 AM
    • #4
    • 17th May 18, 7:02 AM
    Hi
    I wonder if anyone has any experience with my situation.

    The simple version is - a previous employer didn't deduct enough income tax from me and now HMRC want me to pay it.

    The long version is - I recently started my own company and as such the HMRC obviously requires me to submit a self assessment tax return for the 2017-2018 tax year.
    In the 2017-2018 tax year I started working for Company 1 and left that company in approx June 2017.
    I then started working for Company 2 and left that company in March 2018.
    I then started my own company in April 2018.
    When filling out my tax return the self assessment calculation showed I owe almost 1000 in underpaid tax for that period.
    For both Company 1 and Company 2 I was in the higher tax bracket and I have checked both P45s and from a rough calculation it appears that Company 1 deducted approx 13.5% of my income for tax where as Company 2 deducted approx 23% for tax so it's clear (to me at least) that Company 1 is to blame for this?

    My question I guess is do I have any legal recourse to get Company 1 to pay the tax?
    Now obviously I know the tax should have been paid by me in the first place but one would assume that as I have no control over how their payroll calculated my pay / tax I shouldn't be responsible for HMRC now demanding nearly 1000 in outstanding tax?

    Does anyone have any experience / insight to help answer my question?

    Thanks in advance,
    Dave
    Originally posted by xtheonex
    Ultimately you are responsible for the tax you pay, the employer is just the collector of the money.


    So no- No recourse.
    Don't trust a forum for advice. Get proper paid advice. Any advice given should always be checked
    • comeandgo
    • By comeandgo 17th May 18, 7:31 AM
    • 2,177 Posts
    • 2,961 Thanks
    comeandgo
    • #5
    • 17th May 18, 7:31 AM
    • #5
    • 17th May 18, 7:31 AM
    An employer uses the tax code that HMRC advises them to, using the information you have given HMRC. Your tax code is your responsibility, you have to pay the tax.
    • xtheonex
    • By xtheonex 17th May 18, 8:09 AM
    • 6 Posts
    • 0 Thanks
    xtheonex
    • #6
    • 17th May 18, 8:09 AM
    • #6
    • 17th May 18, 8:09 AM
    Thanks for the response.

    I doubt I can get this self assessment wrong?! During the 2017-2018 tax year I only had income from 2 jobs and both of those were full time employment on the PAYE payroll so essentially all I have to do is enter the "total income" and "total tax" figures from both my P45s and that's it right?

    Both employers used the same tax code (1150L) and at both roles I was in the higher tax bracket.

    In terms of figures from the P45...
    Company 1 - Total Pay 11,753.02 - Total Tax 1,583.02
    Company 2 - Total Pay 53,579.68 - Total Tax 12,260.54

    Thanks again,
    Dave

    Have you checked that you actually completed the return correctly?

    You are definitely making too big an assumption about employer 1 being the source of the problem.

    What tax code were you issued with for 2017:18 and did each employer use this code number?

    You really need to post some actual income details for anyone to give more meaningful help. The Self Assessment calculation would also really be needed.
    Originally posted by Dazed and confused
    • xtheonex
    • By xtheonex 17th May 18, 8:12 AM
    • 6 Posts
    • 0 Thanks
    xtheonex
    • #7
    • 17th May 18, 8:12 AM
    • #7
    • 17th May 18, 8:12 AM
    In theory that should be correct but as an employee one has no responsibility for calculating tax or paying it even if one wanted to.

    An employer uses the tax code that HMRC advises them to, using the information you have given HMRC. Your tax code is your responsibility, you have to pay the tax.
    Originally posted by comeandgo
    • xtheonex
    • By xtheonex 17th May 18, 8:16 AM
    • 6 Posts
    • 0 Thanks
    xtheonex
    • #8
    • 17th May 18, 8:16 AM
    • #8
    • 17th May 18, 8:16 AM
    Your theory that I wouldn't be any worse off isn't strictly true because although last year I paid less tax because of someone elses mistakes, this year I'm expected to pay the outstanding tax from last year plus this years taxes. It's especially painful this year as I mentioned I've left my higher rate tax paying role to start my own company where I'll be lucky if I even pay lower rate tax in the first year.
    It doesn't seem fair though does it?! As an employee one has no responsibility for calculating tax or paying it even if one wanted to.

    Thanks,
    Dave

    You said it yourself, the tax should have been paid by you originally. You won't be any worse off in paying it and you'll be considered at least as responsible to ensure you're paying the correct tax. Basically you need to pay this and you have no claim against your original company.
    Originally posted by Gavin83
    • molerat
    • By molerat 17th May 18, 8:59 AM
    • 19,317 Posts
    • 13,524 Thanks
    molerat
    • #9
    • 17th May 18, 8:59 AM
    • #9
    • 17th May 18, 8:59 AM
    Tax on job 1 is correct for a July pay date.
    Last edited by molerat; 17-05-2018 at 9:11 AM.
    https://www.helpforheroes.org.uk/give-support/donate-now/
    • shortcrust
    • By shortcrust 17th May 18, 9:05 AM
    • 2,105 Posts
    • 3,218 Thanks
    shortcrust
    Mistakes happen. If a company accidentally pays you too much salary you have to pay it back (as is endlessly discussed on here) even in circumstances that can seem very unfair. This is no different.
    • Merlin139
    • By Merlin139 17th May 18, 9:19 AM
    • 5,039 Posts
    • 20,202 Thanks
    Merlin139
    If you say company 1 made the mistake then company 2 should have corrected the mistake.

    The P45 from company 1 will have shown the details of your earnings up to a set date. Company 2 then take over controlling how much tax you have paid. Any previous tax paid will then have an effect on what you pay with company 2 as the figures should be recalculated each month.

    What I cannot quite understand is that if you now work for yourself you obviously are not working that hard if you can sit around moaning about the fact that you now have to pay the taxman money that you have always owed them!
    • ReadingTim
    • By ReadingTim 17th May 18, 9:45 AM
    • 2,934 Posts
    • 4,319 Thanks
    ReadingTim
    The liability for the tax remains yours. Under PAYE a company should get your income tax deductions correct, assuming you've kept them up to date with your current tax code (and so have kept HMRC up to date in terms of your employment situation and income so they can issue a tax code in the first place).

    Mistakes happen, but it might be possible to argue that if a mistake which went unrectified (despite you informing them of the error) resulted in some loss to you - for example an interest penalty, then you should be compensated for this loss. But that's only the interest, not the principal.

    So, unless there are penalties on that 1,000, or you're going to have to take out a loan to fund it, I'd suggest you have absolutely no chance whatsoever. Furthermore, as your employment situation was complicated by the fact you worked for yourself for a while, it seems like self assessment has done exactly what it's meant to do, and correctly assessed your overall tax liability. Just because it wasn't collected at the time doesn't mean it still isn't owed, and still needs to be paid.

    Sorry that this isn't the answer you want to here.
    • A Nice Englishman
    • By A Nice Englishman 17th May 18, 9:53 AM
    • 2,117 Posts
    • 1,184 Thanks
    A Nice Englishman
    Think of the 1000 as an interest free business start-up loan from HMRC.
    • xtheonex
    • By xtheonex 17th May 18, 10:57 AM
    • 6 Posts
    • 0 Thanks
    xtheonex
    Update...

    So I phoned HMRC today and spoke to one of their advisers and they looked into it for me and told me where the problem is.

    Basically Company 1 applied the full tax free allowance to my salary for the year even though I only worked there for 3 months. As they didn't provide me with a P45 until a few weeks ago I couldn't pass the P45 on to Company 2 so they weren't aware of this and the applied the tax free allowance to my salary there.

    Is this normal payroll practice from Company 1, to apply a full years tax free allowance on an employment period of only 3 months? It doesn't seem logical to me?
    • chrisbur
    • By chrisbur 17th May 18, 11:06 AM
    • 2,976 Posts
    • 1,612 Thanks
    chrisbur
    Thanks for the response.

    I doubt I can get this self assessment wrong?! During the 2017-2018 tax year I only had income from 2 jobs and both of those were full time employment on the PAYE payroll so essentially all I have to do is enter the "total income" and "total tax" figures from both my P45s and that's it right?

    Both employers used the same tax code (1150L) and at both roles I was in the higher tax bracket.

    In terms of figures from the P45...
    Company 1 - Total Pay 11,753.02 - Total Tax 1,583.02
    Company 2 - Total Pay 53,579.68 - Total Tax 12,260.54

    Thanks again,
    Dave
    Originally posted by xtheonex
    Tax paid on earnings for company 1 appear to be correct if I assume that they were paid in month 4, that the tax figure was actually 1583.20 not 1583.02 and that you were not a higher rate tax payer in this employment.
    It would appear that employer 2 were probably operating the emergency tax code ( still 1150L but usually shown as X 1 non-cumulative or something similar) which sometimes results in under-taxing, in order to check this I would need details of each month/weeks taxable gross and tax paid, if you want to know exactly what happened.
    It is certainly unlikely that the repayment of tax would pass to the employer even if there was some error made by employer 2 they would only be liable if HMRC established that they were basically incompetent running the payroll, just making a mistake would not be enough. The best you can hope for is asking for time to pay.
    • Gavin83
    • By Gavin83 17th May 18, 11:15 AM
    • 5,316 Posts
    • 8,730 Thanks
    Gavin83
    Is this normal payroll practice from Company 1, to apply a full years tax free allowance on an employment period of only 3 months? It doesn't seem logical to me?
    Originally posted by xtheonex
    Look, while I understand your frustrations I think you're focusing in the wrong area. It doesn't matter how much blame you wish to place on company 1 they aren't paying you anything and you'll still need to pay this tax. You'd be better spending the time arranging a payment plan with HMRC and developing your new business.

    I also don't agree you're worse off, you effectively earned more money than you were entitled to last year so you must have either spent it on something meaningful or saved it.
    • ReadingTim
    • By ReadingTim 17th May 18, 11:16 AM
    • 2,934 Posts
    • 4,319 Thanks
    ReadingTim
    Update...

    So I phoned HMRC today and spoke to one of their advisers and they looked into it for me and told me where the problem is.

    Basically Company 1 applied the full tax free allowance to my salary for the year even though I only worked there for 3 months. As they didn't provide me with a P45 until a few weeks ago I couldn't pass the P45 on to Company 2 so they weren't aware of this and the applied the tax free allowance to my salary there.

    Is this normal payroll practice from Company 1, to apply a full years tax free allowance on an employment period of only 3 months? It doesn't seem logical to me?
    Originally posted by xtheonex
    Somebody's got to apply it at some time, so absent the ability to predict the future, it makes sense for the employer who's employing you at the beginning of the tax year to do it. Why Company 2 also applied it I don't know, but maybe the lack of a P45 explains it. Or maybe they simply made a mistake.

    It doesn't alter the fact that you're still liable for the tax though.
    • xtheonex
    • By xtheonex 17th May 18, 11:26 AM
    • 6 Posts
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    xtheonex
    I would have thought logically that it would be applied pro-rata?
    Eg. 11500 tax free allowance for 12 months means 3 months at Company 1 is 2875 should be applied for the 3 months and then the remaining 9 months at Company 2 get the 8625.
    That just seems the most logical to me.

    Somebody's got to apply it at some time, so absent the ability to predict the future, it makes sense for the employer who's employing you at the beginning of the tax year to do it. Why Company 2 also applied it I don't know, but maybe the lack of a P45 explains it. Or maybe they simply made a mistake.

    It doesn't alter the fact that you're still liable for the tax though.
    Originally posted by ReadingTim
    • Scorpio33
    • By Scorpio33 17th May 18, 11:30 AM
    • 520 Posts
    • 739 Thanks
    Scorpio33
    The reason you get issued with payslips is for you to check the correct tax etc has been deducted. That is YOUR responsibility.

    Usually if you are still employed, HMRC would issue a new tax code for this tax year and take the shortfall from PAYE in this tax year. However, as you are now self employed, that is not possible.

    If your payslips had the correct tax taken and it had not been paid to HMRC, then you may well have a reason to put the blame on Company 1. Ultimately, blaming others though will get you no where. You need to pay the tax back, so you need to talk to HMRC.
    • ReadingTim
    • By ReadingTim 17th May 18, 12:01 PM
    • 2,934 Posts
    • 4,319 Thanks
    ReadingTim
    I would have thought logically that it would be applied pro-rata?
    Eg. 11500 tax free allowance for 12 months means 3 months at Company 1 is 2875 should be applied for the 3 months and then the remaining 9 months at Company 2 get the 8625.
    That just seems the most logical to me.
    Originally posted by xtheonex
    Pro-rating would only make sense if company 1 knew, in advance, that you would both be leaving its employment AND taking up employment with someone else for the remainder of the tax year.

    Even if it knew you were leaving (ie end of FTC), it couldn't possibly know what your future plans and job prospects were (ie how long it might take you to find another job).

    Your logic is flawed and you still owe HMRC a grand. Suggest you spend your time and energies working out how you're going to pay than, rather than endlessly arguing here.
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