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

[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.

 

[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!

 

[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.