HMRC Tax Equirey / Penalty Advice

[Horts]

Hi

I am just in the midst of HMRC looking at my 11/12 tax return where is has been identified there is a material difference in my P60 submission and those provided on P14's from two employers.

Having sold the company I worked for, I was TUPE transferred to the acquiring company and they issued a P60 with my previous earning and then my earning with them. At the time the company was sold, I liquidated LTIPS that were paid after I had left the company.

As part of their investigation HMRC has two P14's amounts from the current employer being correct but the amounts from my previous employer include figures that do not appear on the P60 as my previous employer.

When I completed my self assessment I entered all info as per my p60 and genuinely didn't pick up on the discrepancy until HMRC advised me. The additional tip income was about £40k and I have back tax of 11k to pay which I have done as soon as HMRC and myself were in agreement.

I have now had a letter asking me to explain the discrepancy and how it came about as they are considering a penalty. Can anyone offer advice on how to mitigate and handle my response to them?

Thanks

Horts

[LC23]

You need to be clear with them that it was genuine mistake as a starting point. Check the self assessment guidelines for completing the Tax Return. Box 1 on the employment pages is for the P60 income, so state you were following HMRC guidance. If you have always just had to report P60 income in prior years mention that this has always been the case and you were not aware of anything different for 11/12. If the LTIP payments were a one off event this will help that argument.

Did the company use a payroll bureau to run the payroll? Were they provided with details of the LTIP income so can you mention this in your response to HMRC - all income details were provided to a professional outsourced contractor and you expected them to have the relevant qualifications and knowledge to correctly report the amounts on the P60. The LTIP income may not actually have been payrollable depending on the type of plan and whether the shares were readily convertible assets however.

There is a Box 3 on the employment pages for other payments not on the P60 however. Do bear in mind that ultimately it is down to you as the taxpayer to ensure all reportable income is included on your Tax Return. The penalty could be anywhere between 0% and 100% of the tax due so you are trying to mitigate this down as far as possible.

It's difficult to provide a comprehensive response without all the details but the above should help.

[Ozzie Osmond]

Unless you are confident in what you are doing and/or the amount is small, get an accountant.

Once HMRC start talking about penalties things can get exciting pretty quickly, and they also run interest on any underpayment which continues to roll up until it's all paid. In my experience genuine errors are usually cleared up in a pretty friendly manner before the penalty word is used. If all you've had is a first communication with the word somewhere in the small print after lots of ifs and maybes it should just be a matter of explaining everything promptly and clearly.

If you're a director and there's a wobble on P60 the sleeping dog of HMRC is likely to become wide awake and frisky very quickly.

Any doubt - get an accountant on it.