Error on tax return from last year, HMRC now sent nasty letter

[The Phantom]

Got a sudden issue with HMRC who have sent me a nastygram for what looks an error I have made on my 2015 self assessment return.

I was made redundant and had a few jobs tying me over (as an employee) until I found a good new employment. To support my income I also did some catalogue selling for one of these door to door companies plus some selling on ebay. As this extra income needs to be taxed I did a self assessment. I entered all the details as requested online and submitted.

My tax liability was adjusted through my next PAYE code and all seemed fine until a few days ago when I received a letter from HMRC stating that they were investigating my return as there was some income missing and they wanted me to call them by the 13.06 to help with their investigations.

They are alleging a company gave them an additional income figure of £3110.- which was not showing on my return. They say the company told them tax of £160.- was paid against this to HMRC. They say I still owe an additional £500 off pound in tax plus they may fine me.

I was totally perplexed as I had no idea what this was all about.

The company named on the HMRC letter (let's call them M) was one of my previous employers in the period when I had a few employments after my redundancy. I left them end of May 2014. Before I started another employment (with company P) which only lasted 6 months or so before starting my current employment (with company L)

Going back through my records I have a P60 for the tax year ending April 2014 from company M. Then I have a P45 from company P and all other records are from my current employer, L.

I have now realized with shock that I do not have any P45 from company M covering the time from April to May 2014 in my records and that the amount in the letter from HMRC must be the wages for those two months April and May 2014.

As I have no P45 in my folder for those two months I obviously omitted those eight weeks of employment from my return when I completed it in 2015.

I tried to phone HMRC but they are closed by the time I get home from work.

Although it would appear I made an error on my return, what I don't understand is, why HMRC calculates £3110.- of salary at a 20% rate of income tax. I have never paid 20% income tax as my income was never that high. (Always below 20 K pa)

So why do I owe £500.- in tax on £3110.- of wages which have already gone through the PAYE system at the time.

I am totally confused about their calculation.

[BazzaS]

Got a sudden issue with HMRC who have sent me a nastygram for what looks an error I have made on my 2015 self assessment return.

I was made redundant and had a few jobs tying me over (as an employee) until I found a good new employment. To support my income I also did some catalogue selling for one of these door to door companies plus some selling on ebay. As this extra income needs to be taxed I did a self assessment. I entered all the details as requested online and submitted.

My tax liability was adjusted through my next PAYE code and all seemed fine until a few days ago when I received a letter from HMRC stating that they were investigating my return as there was some income missing and they wanted me to call them by the 13.06 to help with their investigations.

They are alleging a company gave them an additional income figure of £3110.- which was not showing on my return. They say the company told them tax of £160.- was paid against this to HMRC. They say I still owe an additional £500 off pound in tax plus they may fine me.

I was totally perplexed as I had no idea what this was all about.

The company named on the HMRC letter (let's call them M) was one of my previous employers in the period when I had a few employments after my redundancy. I left them end of May 2014. Before I started another employment (with company P) which only lasted 6 months or so before starting my current employment (with company L)

Going back through my records I have a P60 for the tax year ending April 2014 from company M. Then I have a P45 from company P and all other records are from my current employer, L.

I have now realized with shock that I do not have any P45 from company M covering the time from April to May 2014 in my records and that the amount in the letter from HMRC must be the wages for those two months April and May 2014.

As I have no P45 in my folder for those two months I obviously omitted those eight weeks of employment from my return when I completed it in 2015.

I tried to phone HMRC but they are closed by the time I get home from work.

Although it would appear I made an error on my return, what I don't understand is, why HMRC calculates £3110.- of salary at a 20% rate of income tax. I have never paid 20% income tax as my income was never that high. (Always below 20 K pa)

So why do I owe £500.- in tax on £3110.- of wages which have already gone through the PAYE system at the time.

I am totally confused about their calculation.

 

Ask for a breakdown of the £500.

It may be tax owed, interest in the tax or include a penalty for the erroneous return,

Once you know the breakdown, you can pay the tax and interest and then address any penalty.

[The Phantom]

Thank you for the swift reply.

Their letter states they haven't decided on a fine yet, it depends on the outcome of their investigation.

It says company M told them of £3110.- income and tax payment of £160.- against this.

They say (correctly) my return makes no mention of this.

 

They go on to say I owe another £500.- pound in tax on top of the £160.-. Plus (if they decided to do so) a fine.

 

The way I read it, they want around 20% of tax from me for wages of £3110.- which have already been taxed through PAYE anyway.

So at this stage they are just informing me, there is an investigation going on, and I can either assist them with it or choose not to do so.

As I can't phone them as they have requested, I will write them a letter and see if I can get more information from them.

[slick132]

Hi Phantom.

 

Do NOT call them by 13/06 - keep all communication in writing.

 

I suggest you write to HMRC and say, "I refer to your letter of xxdate and ask that you confirm the pay and tax details, and the start and finish dates for the [employer M] for the year ended 5/4/15.

 

Once I receive these, I will be in a better position to respond fully to you but I want to confirm that any omission was purely an oversight.

 

Furthermore, as I was taxed on PAYE during the time I worked for this employer, no underpayment should have arisen, whether I correctly reported the income and tax or I omitted it

 

Please let me have your calculation showing tax underpaid and the reason for this."

 

If you had multiple employments in the year (regardless of the self employed work), tax underpayments can happen, especially if you were working part time for more than one firm at a time.

 

Can you say roughly what you reported as earnings for the self employed catalogue work, and what tax was deducted if any.

 

Also, did you report any net income from eBay sales in the year (sale proceeds, less purchase and sales costs. If so, how much ?

 

Finally, call the employer (M) and seek confirmation of pay and tax for April and May 2014 and ask if they know why you rec'd no P45 from them.

 

Edited September 21, 2016 by slick132
typo

[The Phantom]

Thank you so much !!

I can't phone them anyway, they are closed by the time I get home, so have put together a letter as advised above which I will post recorded delivery.

 

I think the reason I don't have a P45 from M is that all their HR and Payroll was done centrally from Head Office upcountry. Not locally. We didn't have an HR or Payroll department. They wouldn't issue any paper pay slips or similar documents , but made them available through their internal computer system. You could access them from your terminal at work. I wonder whether they made the P45 available that way after I left and I never accessed the system anymore, (simply because I wasn't there anymore). That's all I can imagine. And as it was only for around 8 weeks of work it never retrospectively occurred to me it was missing from my records and documents.

When I then did the tax return over a year later it had vanished from my memory altogether and this is how it must have happened...

[slick132]

Can you give answers to paras 7 and 8 in my post.

 

[The Phantom]

OK, apparently the explanation is , because I didn't declare 2 weeks worth of wages my free allowance was used up differently. If I had correctly declared it I would have had to pay more tax on my additional income, therefore an underpayment of £500.- in tax

I still don't quite understand it 100% how it can result in so much underpayment, but apparently they say they are right and I am wrong, but they generously declared they won't fine me on this occasion.

They have sent me a demand for payment which was in the post for two weeks and they already charged interest for the time it spent in the post.

Anyway I sent them a letter back advising them I couldn't pay it all in one go and offered to pay in instalments or whether they could make an adjustment to me PAYE code to collect it.

They said they couldn't collect it through PAYE and I had to pay in full or else. So I started to make payments in instalments (paid £150.- so far) but they are not reacting to my letters and keep sending demands and threats to pass it over to debt collectors if I don't contact them or pay.

I have sent three letters so far but they are not responding as such but keep sending chasers and demands instead.

I tried to call their helpline if you have financial difficulties but it is impossible to get through.

I am at a loss on what to do. Just keep on paying in instalments or what do I do ?

[slick132]

Hi TP,

 

1. Have they replied in writing to your letter.

 

2. Have HMRC supplied a summary for the tax year showing income from all sources and tax deducted by PAYE. You should have received a calculation setting out the totals of income from all sources and tax deducted for the y/e 5/4/15.

 

3. When you have sent instalments, did you quote your UTR and the 2014/15 tax year to make sure the money is credited correctly.

 

4. When they have made further demands, does it look like they've given you credit for the pay'ts you have made so far.

 

[The Phantom]

Hello Slick

thank you for your reply.

1) They have replied to one of my letters advising that their findings are correct, and they couldn't collect the outstanding amount through PAYE, I had to pay in full straight away, as interest was accrueing on a daily basis. I then received shortly afterwards a letter from their debt management department advising they noted I hadn't paid as requested and I should pay now immediately. They did not respond to three further letters I wrote asking for payment in instalments. Instead I received a further letter from their debt management department stating I hadn't contacted them and therefore they would be passing the debt over to a debt collector shortly unless I now pay up.

2) yes, they sent me a two page calculation sheet with their first letter which shows a raft of figures, numbers, calculations, spread over two pages, showing I owe £500.- in tax

3) yes, I have quoted UTR followed by a K as instructed on their payment demand notices. I have made payment through online banking on a monthly basis, paid off £150.- so far

4) yes, on their last payment demand they credited the first £50.- I sent but not the £100.- I sent afterwards, so the last payment demand was £100.- too high

[slick132]

Hi TP,

 

I suggest you now make a written complaint to :-

 

PAYE and Self Assessment Complaints

HM Revenue and Customs

BX9 1AB

 

Make a brief complaint saying :-

 

1. I must complain that my letters of xxx dates have been ignored by you. Copies are enclosed for reference.

 

2. I am a PAYE tax payer so I must ask why I cannot pay pay tax underpaid in 2014/15 by way of a PAYE coding restriction.

 

3. I have so far made payments of £150 but this has not been reflected in the ongoing demands I have received.

 

4. I have offered to pay in instalments I can afford but have been repeatedly harassed for payment in full which I obviously cannot afford. Why is this.

 

See how they respond.

 

Send this from the PO, get a free Cert of Posting at the counter and keep it safe.

 

Edited October 17, 2016 by slick132

[topcat1802]

Go to https://www.gov.uk/personal-tax-account

 

 

And create an account, you can then look at your tax details on line and track all communication with HMRC

[TaxHero]

Nowadays only the last tax year can be collected via the PAYE tax code. Previous years cannot.