Large Tax claim from HMRC re underpayment of PAYE - advice appreciated

[SJKindebt]

Hello. I was made redundant in June 2010, but due to long length of service and it being 'voluntary' it was a very generous settlement. The problem is HMRC wrote to me on January 31st this year to say that I had underpaid tax on it by £6,833.60. This was set out with a P800 form. The tax year in question is quoted as year ended 5 April 2011.

 

After speaking to them, they advised I go back to my employer and check with them as to how they based their calculations at the time of my final payment, and to provide breakdowns of this. I have written to them twice now, and have had no reply.

 

Obviously HMRC are keen for a resolution on this. I would therefore be grateful for any advice on how I should proceed. Having re-read my separation agreement, their is a clause in there that absolves my ex-employer from any problems that may arise with regards to PAYE tax claims from HMRC, which pretty much seems to rule out taking up any complaint with them. I am also a bit annoyed that it has taken HMRC this long to get around to notifying me of the problem.

 

I appreciate that at the end of the day the only advice may be that there is nothing I can do other make arrangements with HMRC to pay this amount. If so, please feel free to tell me that! What I would like to know particularly is how I can ensure that they are entitled to this full amount, and if there is any way for me to register a strong complaint over their delay in handling this (a delay which has caused me some frustration, and put me a bit in a hole regarding my current plans).

[Gbarbm]

Can I just confirm the following;

1) that the redundancy was in excess if £30k.

2) the payment was a "true" redundancy payment in that you were superfluous to requirements and/or the job no longer existed.

3) that the payment did not comprise any salary related payments such as transfer if company asset, holiday pay etc

 

Any payments below £30k are not liable as long as you can answer yes/no to question 2 & 3 respectively.

If the payment is more than £30k the excess is subjected to tax and NI

It is your employers statutory obligation to deduct the tax/NI, remit it to HMRC and record it on a P45

You could appeal against the P800 assessment on the grounds that your employer should have made the deductions and their failure to do so is a breach of the PAYE regulations and s401 ITEPA 2003 (ITEPA = income tax, earnings and pension act)

You can also throw in the delays by HMRC that you have experienced

[SJKindebt]

Gbarbm - thank you for your reply. I can answer yes/yes/no to those questions. As I understand things, the problem may be that my ex-employer failed to correctly deduct PAYE at the basic rate for the year (at least that is the theory that HMRC have put forward to me). My P45 (part 1A) does not show payments or tax deductions in relation to my redundancy package - just my salaried pay and deductions from that.

[Gbarbm]

So it's the employers fault!

HMRC may prefer it if you pay it because it's easier for them of course, but the point is Your employer made the error so I would push that with HMRC.

There is some legislation within the PAYE directions which cover this point, I will try and find it and you can include it in your appeal letter to HMRC

[Gbarbm]

Found it!

 

PAYE92060 - Reconcile individual: posting P14 to individual record: revision of employer’s returns

Employers are responsible for the operation of PAYE and must deduct the correct amounts of PAYE tax due. This means that you should always seek to recover any PAYE tax from the employer in the first instance.

It is recognised however that the first time an under-deduction is brought to your attention may be by contact from an employee themselves. This may be by receipt of an informal PAYE calculation or a PAYE tax coding notice.

In all cases of under-deducted tax you should follow SPD 60 and the guidance at PAYE92066.

 

Refer to this in your letter, you may still end up paying the tax but you may as well go down fighting.

HMRC will argue that you've had a gross and not a net payment.

You could counter argue with the fact that as it was normal practice for your employer to deduct tax from all the other payments you received from them, you had no reason to believe that this payment would be any different

[SJKindebt]

Thank you - that would be very much appreciated!

[Dyeo]

Having recently achieved victory on my own underpayment, may I suggest you look at using the Extra Statutory Concession (HMRC's ESC A19 - http://www.hmrc.gov.uk/esc/esc.htm) as another line of defence against these numpties.

 

ESC A19 basically means that if HMRC have been provided with the correct information, but have failed to use it for more that 12 months (which for the tax year 2010/11 means doing nothing until AFTER 6 April 2012), then the underpaid tax should be written off.

 

In order to make a claim for this, it must have been reasonable for you to believe your tax affairs were in order (in your case the fact that your PAYE was being handled by your previous employer, should work).

 

Making a claim If you think this concession applies to you, then you need to telephone HMRC on 0845 300 0627 indicating that you are making a claim under 'ESC A19'. You will need to provide the following information:

 

• what tax year and underpayment the claim relates to
  
• what information HMRC failed to make proper and timely use of and any supporting information
  
• what date this information was provided
  
• reason(s) why you thought your tax affairs were in order prior to receiving the Tax Calculation
  

http://www.hmrc.gov.uk/esc/esc.htm

[SJKindebt]

Thank you for your reply. Unfortunately they wrote to me in January 2012, so I do not think this will apply for me. I am currently drafting a letter to HMRC with the aim to send it on Monday.

 

Congratulations on your victory though, it does bring me some hope .