P800 underpayments for 2009/10, 2010/11 and 2011/12

[clareyluxo]

Hi, I would be grateful for some help! My husband has recently received his third P800 underpayment notice for 2011/12 (already received P800's for 2009/10 and 2010/11) and I have been trying to work through the mountian of tax coding notices he received which covered these 3 tax years.

 

I can see that the problem has occured as he received 2 personal allowances - he is both employed and is receiving a pension. However, the amounts of underpayments on the P800 do not correspond to the values shown as tax owing from previous years on the tax coding notices - the amounts on the coding notices vary greatly and are generally different each time a coding notice is issued! We have seen a tax advisor who said that we shouldn't worry too much about the amounts shown on the tax coding notices but this worries me as I was under the impression that the repayment restrictions on these coding notices should be calculated correctly so that it takes back the addtional tax caused by the underpayments.

 

My main query is am I right in thinking that the repayment restriction shown on last coding notice issued (one has been recieived for the 2013/14 tax year) and the amount of tax this will pay back should equal the total amount of tax underpaid for all previous years in total?

 

I hope this makes sense.....!

 

Any help would be greatly appreciated, thanks, Clare

[honeybee13]

Hello Clare.

 

That sounds complicated and I don't know the answer either, but will try to get you some help.

 

My best, HB

[slick132]

Hi Clarey,

 

It's not uncommon for an underpayment to arise in a tax year when a pension starts being paid.

 

It may also be that, due to circumstances, tax can be underpaid over two years.

 

However, if HMRC were provided with the right info by you, the employer and the pension payer, I would expect the tax codings to be sorted to stop further underpayments arising.

 

A tax code is useful in collecting the right amount of tax over the year in the majority of cases. However, where there are multiple income sources, a tax code may be changed several times through the year yet still fail to stop an underpayment arising.

 

The problem can be made worse because collecting an underpayment through tax coding is more difficult when a pension is already "using" a significant chunk of the annual Personal Allowance.

 

The tax code is basically an attempt to take the right amount of tax during the current tax year without necessarily knowing all the final years' figures. Once the tax year ends, the tax codes become irrelevant and what finally matters is :-

 

1. Total income received

2. Tax allowances due

3. Tax due for the year

4. Tax paid in the year

 

In any tax year, if (3) is greater than (4), you'll have underpaid tax.

 

I assume the Tax Advisor just had a quick look to offer opinion but you've not paid to retain their services. Is that right ?

 

If you want help checking over the P800's, you can copy them onto your thread here after hiding personal data that identifies you. Or you could send them and the tax code notices to me by email so I can look over them and comment further.

 

What concerns me is that we're about to start a new tax year and you should do your best to ensure your 2013/14 tax code is as accurate as possible.

 

[honeybee13]

Thank you for answering the SOS, slick.

[clareyluxo]

Hi Slick,

 

Many thanks for your response.

 

I've checked the P800's already and agree the underpayments so they're not really the issue.

 

It's a bit odd really as the pension started in 2007 and was given the BR tax code then and somewhere along the line the tax office sent a revised coding notice out given a code equivalent to the personal allowance and at the same time issuing a personal allowance code to the employer. So very strange as to why they would change the codes for 09/10 given that for 2007 and 2008 the tax collected was correct - unfortunatley I don't have coding notices for when it was changed so can't check what was on them (my husband is a bit shredder obsessed!)

 

I'd done lots of the donkey work with the all the paperwork when we saw the tax advisor so he didn't really tell me anything I hadn't already established myself - except when we were at the meeting I queried with him that I felt that the underpayment restriction shown on the tax coding notices and the amount of tax that would be repaid as a result of that restriction should match the amount shown on the P800 - he said that I shouldn't worry about the amount of repayment restriction as these are generally wrong! The more I thought about the more I came to the conclusion that if a tax code has been changed to include a repayment restriction to collect underpaid tax then surely the amount shown on the coding notice should calculate to be the amount of underpayment shown on the P800.

 

When collating the coding notices I saw that in the space of 4 weeks there were 3 notices issued - the first showed a repayment restriction collecting an unpayment of approx £400, the 2nd (only 11 days later) showed a repayment restriction collecting an underpayment of approx £2004 and then the 3rd (13 days later) showed a repayment restriction collecting an underpayment of approx £1100. This last figure was shown again on coding notice issued 5 months later. None of these figures matched any of the amounts shown on the P800s.

 

 

As my husband has been paying more tax back - I have just estimated how much he's overpaid 2012/13 based on taxble pay, tax due, tax paid etc by by assuming pay for March (which should be ok) I am trying to establish what is still outstanding but have absolutely no idea what's still left as none of the figures match at all. I know what I think it should be based on P800s and the figure he's overpaid by this year but have no idea whether or not that's the figure the tax office agree!

 

Sorry - I may be confusing the issue and may be making things much more complicated that perhaps they should be but I am concerned that he may be paying back underpayments of tax for sometime to come in view of the fact that no figures shown on tax office coding notices equate to P800s!

 

Many thanks, Clarey

[slick132]

Hi Clarey and thanks for the further info.

 

If the pension started in 2007, HMRC have no excuse for messing up coding notices this long after.

 

It's reasonable to expect them to use accurate estimates of what the annual pay, or the annual pension, is likely to be. As I said above, the coding notices can only use estimates during the tax year for what the final figures prove to be after the tax year ends.

 

However, if HMRC have failed to make timely use of information that they have, then you can ask that underpayments, which have arisen as a result of their failings, should be written off. It's certainly worth making a brief claim to this effect - the worst they can say is "no".

 

The success of any such claim may depend on your YH's overall income. But if repaying the underpaid tax is causing, or is likely to cause, financial difficulty, HMRC should consider the position carefully and at a more senior level.

 

As regards the position at 5th April 2013, wait until his final salary and pension payments are in. The March payslips and/or 2012/13 P60's will show the cumulative figures for pay and tax fore the year. You can then work out total income, less allowances due, tax due and tax paid. You can then see if the tax overpaid for 2012/13 helps reduce the balance of tax underpaid and brought forward from 2011/12.

 

If you feel HMRC have failed to use info available to them to issue a proper coding notice(s), you can ask that the case is reviewed by a senior staff member to ensure that every effort is made to stop errors being made unnecessarily. Even though the coding notices have to include estimates, getting them right is not rocket science!

 

[clareyluxo]

Hi Slick

 

Thank for all your help - we will write to HMRC to ask them to write off as we feel that it must be their error as the pension code was ok when it first started and my husband has received the pension and been employed since it started so there's been no confusion as it's never been his sole income.

 

Will let you know how we get on.

 

Also, thank you for putting my mind at rest that the amounts shown on the coding notice should sort of resemble the underpayments - thought I was losing the plot!

 

Thanks again, Clarey

[slick132]

You're very welcome and keep us informed of progress.

 

When writing to complain and asking for the underpayments to be written of, you could include the following and head the letter Formal Complaint :-

 

I refer to Forms P800 issued by HMRC for recent tax years.

 

My pension started in 2007 and I realise this may have caused a PAYE problem for that year and perhaps the following one. However, tax underpayments have arisen consistently over a number of years and this should have been avoided, certainly for the more recent years.

 

It is my belief that HMRC had all the information available to issue reasonably accurate coding notices so the correct amount of tax (or close to it) could have been deducted under PAYE. However, you failed to use this information in a proper and timely manner, issuing a succession of coding notices, none of which has resulted in tax being correctly deducted under PAYE.

 

The failure of HMRC to issue accurate coding notices over a number of years has resulted in significant tax underpayments. With my limited income, this is causing me and my wife a great deal of stress.

 

I therefore formally request that this matter be reviewed by senior staff with a view to :-

 

1. The remaining underpayments of tax being written off.

 

2. Ensuring that all available information is used in a proper and timely manner to ensure that all future coding notices are as accurate as possible, thereby avoiding future underpayments.

 

3. Ensuring, in particular, that the coding notices for 2013/14 which comes into force on 6th April are reviewed urgently to see that they are as accurate as possible.

 

I look forward to your urgent response.

 

As I said above, the outcome will depend on several factors but it's worth a try.

 

[clareyluxo]

Thank you again and thank you so much for the template.

Best wishes, Clarey