P800 Underpaid tax help
Discussion
Ok here goes.
I'll try and explain this as succinctly as possible, but there's a good chance I'll get it mixed up somewhere, I'll clarify where possible/requested.
I'm looking for some advice/help: I had a lovely letter (P800 tax calculation) from HMRC saying I'd underpaid tax for the last 3 years and they want it back.
The crux of it is they are saying that I've underpaid that tax required due to a preferential loan rate from an old employer. "The amount of beneficial loan included in your PAYE code was lower than the amount taxable."
Now, my employer was sending all the requisite P11D forms off to HMRC so I'm a touch confused how it can be so far in arrears. I would have expected it to be a year in lag, but no more. i.e. benefit in year 1 would be paid in year 2 etc etc, as the value of the benefit would not be known until year end (variable rate loan)
However hmrc are claiming I've been in rolling arrears for years (example numbers follow):
2008-2009: Underpaid 500
2009-2010: Underpaid 1000 PLUS the 500 from the prior year [Total owed now: 1500]
2010-2011: Underpaid 100 PLUS the 1500 from the prior years combined. [Total owed now: 1600]
So they want to whip another (based on numbers above) 150-odd quid a month off me all next year.
Now, given they had all the paperwork etc from the employer, I can't understand why they are so far out for so long. I rang them and they do not want to know. They are taking the line that its my responsibility to tell them this (I had assumed that the employers communication would cover that since they handle all paying of tax etc) and to check that it was right. Advised they cannot take instruction from employers on this matter too.
Do I have any recourse here? I fail to see how I could *reasonably* expect to know my tax code was wrong when I had paperwork from my employer advising that HMRC also had the requisite information.
My gut feel is that HMRC screwed this up and I should only ever be at most a year out, in the example above that would mean I should be 100 down 'net' rather than 1600. But as I say, they all but told me "f
k you very much, we're never wrong now gimme the money".
Does anyone have any thoughts/experience on this? I've no issue paying what I'm owing, but its going to pinch bloody hard paying back a 3 year decifict in one year and doubly irritating that I was sure I was covered in terms of feeding them the correct information etc.
As mentioned at the outset, this might not be completely clear, I'll try and clarify where possible.
I'll try and explain this as succinctly as possible, but there's a good chance I'll get it mixed up somewhere, I'll clarify where possible/requested.
I'm looking for some advice/help: I had a lovely letter (P800 tax calculation) from HMRC saying I'd underpaid tax for the last 3 years and they want it back.
The crux of it is they are saying that I've underpaid that tax required due to a preferential loan rate from an old employer. "The amount of beneficial loan included in your PAYE code was lower than the amount taxable."
Now, my employer was sending all the requisite P11D forms off to HMRC so I'm a touch confused how it can be so far in arrears. I would have expected it to be a year in lag, but no more. i.e. benefit in year 1 would be paid in year 2 etc etc, as the value of the benefit would not be known until year end (variable rate loan)
However hmrc are claiming I've been in rolling arrears for years (example numbers follow):
2008-2009: Underpaid 500
2009-2010: Underpaid 1000 PLUS the 500 from the prior year [Total owed now: 1500]
2010-2011: Underpaid 100 PLUS the 1500 from the prior years combined. [Total owed now: 1600]
So they want to whip another (based on numbers above) 150-odd quid a month off me all next year.
Now, given they had all the paperwork etc from the employer, I can't understand why they are so far out for so long. I rang them and they do not want to know. They are taking the line that its my responsibility to tell them this (I had assumed that the employers communication would cover that since they handle all paying of tax etc) and to check that it was right. Advised they cannot take instruction from employers on this matter too.
Do I have any recourse here? I fail to see how I could *reasonably* expect to know my tax code was wrong when I had paperwork from my employer advising that HMRC also had the requisite information.
My gut feel is that HMRC screwed this up and I should only ever be at most a year out, in the example above that would mean I should be 100 down 'net' rather than 1600. But as I say, they all but told me "f
k you very much, we're never wrong now gimme the money".Does anyone have any thoughts/experience on this? I've no issue paying what I'm owing, but its going to pinch bloody hard paying back a 3 year decifict in one year and doubly irritating that I was sure I was covered in terms of feeding them the correct information etc.
As mentioned at the outset, this might not be completely clear, I'll try and clarify where possible.
Unfortunately, the onus is on you to check that your coding notice is correct. HMRC only work with documentation that is supplied to them.
You should have copies of the P11-D forms for each of the years to check that your code is correct.
Having said that, it is not unusual for them to get it very wrong.
Once you establish that the coding notice is wrtong, getting it put right is a 'relatively' painless process.
Making sure that your code is correct however is a dark art in my opinion.... I simply hand mine to Mrs Meeja, who tells me within seconds whether it is right or not. She has the advantage of being one of HMRC's inspectors!
ETA: They are allowing you to pay back through your code at least.... I think they *could* ask you for the lot in one go! (I might have made that bit up, as that option may not apply to PAYE employees)
You should have copies of the P11-D forms for each of the years to check that your code is correct.
Having said that, it is not unusual for them to get it very wrong.
Once you establish that the coding notice is wrtong, getting it put right is a 'relatively' painless process.
Making sure that your code is correct however is a dark art in my opinion.... I simply hand mine to Mrs Meeja, who tells me within seconds whether it is right or not. She has the advantage of being one of HMRC's inspectors!
ETA: They are allowing you to pay back through your code at least.... I think they *could* ask you for the lot in one go! (I might have made that bit up, as that option may not apply to PAYE employees)
Edited by Meeja on Tuesday 3rd January 09:32
1st of all - can you absolutely confirm that all the required information was provided in the form of P11Ds by your employer to HMRC?
A written confirmation from the employer would be VERY good evidence as well as a copy of the P11D itself.
Did your employer provide you with copies of the P11D each year?
Did you check your PAYE codings for each year to make sure that you were being taxed correctly on the beneficial loan?
If you did, did you realise there was a problem and did you take any steps to alert HMRC that there was a problem. If you failed to do this, this is the argument that HMRC will use to say that you failed to monitor your own tax affairs correctly and that the underpaid tax is correctly due.
HMRC are FINALLY getting to grips with a massive problem that has been lurking at the heart of the PAYE system for many, many years - i.e. the fact that MANY people have been issued with incorrect PAYE Codes over the years and that people in general are so ignorant of how the coding system works that they didn't realise that there was a problem with the PAYE tax they wwre paying.
A written confirmation from the employer would be VERY good evidence as well as a copy of the P11D itself.
Did your employer provide you with copies of the P11D each year?
Did you check your PAYE codings for each year to make sure that you were being taxed correctly on the beneficial loan?
If you did, did you realise there was a problem and did you take any steps to alert HMRC that there was a problem. If you failed to do this, this is the argument that HMRC will use to say that you failed to monitor your own tax affairs correctly and that the underpaid tax is correctly due.
HMRC are FINALLY getting to grips with a massive problem that has been lurking at the heart of the PAYE system for many, many years - i.e. the fact that MANY people have been issued with incorrect PAYE Codes over the years and that people in general are so ignorant of how the coding system works that they didn't realise that there was a problem with the PAYE tax they wwre paying.
Eric Mc said:
1st of all - can you absolutely confirm that all the required information was provided in the form of P11Ds by your employer to HMRC?
A written confirmation from the employer would be VERY good evidence as well as a copy of the P11D itself.
Yup - its written on the back of the papers I received and the numbers on the P800 match exactly to the P11D I have in my possession. They wouldn't have the correct numbers for the P800 without it.A written confirmation from the employer would be VERY good evidence as well as a copy of the P11D itself.
Eric Mc said:
Did your employer provide you with copies of the P11D each year?
Yup.Eric Mc said:
Did you check your PAYE codings for each year to make sure that you were being taxed correctly on the beneficial loan?
If you did, did you realise there was a problem and did you take any steps to alert HMRC that there was a problem. If you failed to do this, this is the argument that HMRC will use to say that you failed to monitor your own tax affairs correctly and that the underpaid tax is correctly due.
I'll certainly have glanced at them (hope I still have them actually) but how I could tell they were 'wrong'? I've not got them to hand but the wording in the P800 is that "the amount of beneficial loan included in your PAYE code was lower than the amount taxable. An underpayment for an earlier year was included in your PAYE code, but the actual amount underpaid for that year was higher"If you did, did you realise there was a problem and did you take any steps to alert HMRC that there was a problem. If you failed to do this, this is the argument that HMRC will use to say that you failed to monitor your own tax affairs correctly and that the underpaid tax is correctly due.
From that (as I say, tax code letters not to hand) they knew, they changed it, how could I reasonably know that was 'wrong'? Hope that makes sense, wish I'd grabbed the code papers before I left this morning.
Edit: This makes even less sense. How can the 2009-2010 year have "underpayment for an earlier year was included" and yet carry forward the full amount from the prior year at the end as the 'net' underpayment??!
2008-2009: Underpaid: 500
2009-2011: Underpaid: 1000 PLUS the original 500. How could that happen if the 2009-2010 period included [some] of the prior years underpayment?
Eric Mc said:
HMRC are FINALLY getting to grips with a massive problem that has been lurking at the heart of the PAYE system for many, many years - i.e. the fact that MANY people have been issued with incorrect PAYE Codes over the years and that people in general are so ignorant of how the coding system works that they didn't realise that there was a problem with the PAYE tax they wwre paying.
Likely, I'll freely admit I don't have the first clue how it all works and I had (perhaps rashly) assumed that it was all ticking over ok as I'd had no problems in the past, the right papers seemed to be coming through so I had no reason to think it would be wrong.@Meeja: Yeah they kindly offered to alter my tax code but that's going to sting and would probably double dip by simply lowering my allowance pushing my into the 40% bracket :/ Might actually be cheaper just blitzing it up front on a credit card or something in the long run and paying that back over the year.
Edited by roachcoach on Tuesday 3rd January 09:52
Edited by roachcoach on Tuesday 3rd January 09:54
The most dangeruous word in UK tax is "assumed".
The codings are issued by HMRC to individuals with explicit instruction written on them that they should be checked and HMRC should be alerted to any problems. They should also be retained in case there are disputes.
People really do need to start learning a bit about how UK tax works, especially the PAYE system as it affects around 20 million of us.
I'm not blaming you personally, but for far too long far too many people have "assumed" that the PAYE system works correctly 100% of the time. It does not and it never has.
I would try an ESC A19 (Extra Statutory Concession A19) get out on the basis that HMRC had all the correct information at the correct time yet still failed to implement the Benefit details correctly. Your employer should be fully supportive to you on this matter.
Draft a letter to HMRC.
Enclose photocopies of the relevant P11Ds together with any supporting documentation you can obtain from your employer showing when the P11Ds were submitted.
State in the letter that this is a formal appeal against the tax assessment under ESC A19 on the basis that HMRC were completely informed of the situation at the correct times and it is their fault that the tax was not collected correctly.
The codings are issued by HMRC to individuals with explicit instruction written on them that they should be checked and HMRC should be alerted to any problems. They should also be retained in case there are disputes.
People really do need to start learning a bit about how UK tax works, especially the PAYE system as it affects around 20 million of us.
I'm not blaming you personally, but for far too long far too many people have "assumed" that the PAYE system works correctly 100% of the time. It does not and it never has.
I would try an ESC A19 (Extra Statutory Concession A19) get out on the basis that HMRC had all the correct information at the correct time yet still failed to implement the Benefit details correctly. Your employer should be fully supportive to you on this matter.
Draft a letter to HMRC.
Enclose photocopies of the relevant P11Ds together with any supporting documentation you can obtain from your employer showing when the P11Ds were submitted.
State in the letter that this is a formal appeal against the tax assessment under ESC A19 on the basis that HMRC were completely informed of the situation at the correct times and it is their fault that the tax was not collected correctly.
Edited by Eric Mc on Tuesday 3rd January 09:57
But (I'd need to check when I get home) if the tax code shows an amount of beneficial loan accounted for, how could I reasonably know the tax code is wrong and has been for years?
Its got the basic allowance, its has a provision for the loan...what else can I do?
The guy I spoke to on the phone suggested I should have contacted them prior to the tax year with the amount of benefit for due for the coming year. He seemed unable to demonstrate how I could quantify a variable benefit prior to the fact, but was quite adamant I should be telling them first. That would work for a company car or other 'fixed' benefit, but its hardly appropriate for a fluctuating rate loan.
Edit: I shall do, I know you're not having a go at me, I'm pushing the reasonable part as that is the key to a successful appeal, if I seem unreasonably to the folks on a forum, I'm not a cats chance in hell with HMRC
Its got the basic allowance, its has a provision for the loan...what else can I do?
The guy I spoke to on the phone suggested I should have contacted them prior to the tax year with the amount of benefit for due for the coming year. He seemed unable to demonstrate how I could quantify a variable benefit prior to the fact, but was quite adamant I should be telling them first. That would work for a company car or other 'fixed' benefit, but its hardly appropriate for a fluctuating rate loan.
Edit: I shall do, I know you're not having a go at me, I'm pushing the reasonable part as that is the key to a successful appeal, if I seem unreasonably to the folks on a forum, I'm not a cats chance in hell with HMRC
roachcoach said:
But (I'd need to check when I get home) if the tax code shows an amount of beneficial loan accounted for, how could I reasonably know the tax code is wrong and has been for years?
Its got the basic allowance, its has a provision for the loan...what else can I do?
The guy I spoke to on the phone suggested I should have contacted them prior to the tax year with the amount of benefit for due for the coming year. He seemed unable to demonstrate how I could quantify a variable benefit prior to the fact, but was quite adamant I should be telling them first. That would work for a company car or other 'fixed' benefit, but its hardly appropriate for a fluctuating rate loan.
Edit: I shall do, I know you're not having a go at me, I'm pushing the reasonable part as that is the key to a successful appeal, if I seem unreasonably to the folks on a forum, I'm not a cats chance in hell with HMRC
Tax law states that a taxpayer should be knowledgeable of the tax regulations that relate to their particular circumstances. You may feel that it is unreasonable that you should know how to calculate the texable benefit related to cheap or free loans provided by an employer, but HMRC do not.Its got the basic allowance, its has a provision for the loan...what else can I do?
The guy I spoke to on the phone suggested I should have contacted them prior to the tax year with the amount of benefit for due for the coming year. He seemed unable to demonstrate how I could quantify a variable benefit prior to the fact, but was quite adamant I should be telling them first. That would work for a company car or other 'fixed' benefit, but its hardly appropriate for a fluctuating rate loan.
Edit: I shall do, I know you're not having a go at me, I'm pushing the reasonable part as that is the key to a successful appeal, if I seem unreasonably to the folks on a forum, I'm not a cats chance in hell with HMRC
I would not argue this point. My argument would be based on the fact that HMRC had all the information they were supposed to have at the time they were supposed to have it - and STILL failed to do their job properly.
Eric Mc said:
People really do need to start learning a bit about how UK tax works, especially the PAYE system as it affects around 20 million of us.
I genuinely believe that of those 20m, the people who fully understand the coding system are in the minority.Mrs Meeja made an 'official suggestion' at work many years ago, that the basics of PAYE taxation and coding was somehow taught in schools at fifth form level... Since the majority of the pupils would sooner or later be subject to PAYE, it wouldn't have taken too much effort at that young age to give them a basic understanding of allowances, and how the coding system worked.
Needless to say, it fell on deaf ears....
Meeja said:
I genuinely believe that of those 20m, the people who fully understand the coding system are in the minority.
Mrs Meeja made an 'official suggestion' at work many years ago, that the basics of PAYE taxation and coding was somehow taught in schools at fifth form level... Since the majority of the pupils would sooner or later be subject to PAYE, it wouldn't have taken too much effort at that young age to give them a basic understanding of allowances, and how the coding system worked.
Needless to say, it fell on deaf ears....
I've been saying that for a while (look through similar threads over the past few months).Mrs Meeja made an 'official suggestion' at work many years ago, that the basics of PAYE taxation and coding was somehow taught in schools at fifth form level... Since the majority of the pupils would sooner or later be subject to PAYE, it wouldn't have taken too much effort at that young age to give them a basic understanding of allowances, and how the coding system worked.
Needless to say, it fell on deaf ears....
Eric Mc said:
Meeja said:
I genuinely believe that of those 20m, the people who fully understand the coding system are in the minority.
Mrs Meeja made an 'official suggestion' at work many years ago, that the basics of PAYE taxation and coding was somehow taught in schools at fifth form level... Since the majority of the pupils would sooner or later be subject to PAYE, it wouldn't have taken too much effort at that young age to give them a basic understanding of allowances, and how the coding system worked.
Needless to say, it fell on deaf ears....
I've been saying that for a while (look through similar threads over the past few months).Mrs Meeja made an 'official suggestion' at work many years ago, that the basics of PAYE taxation and coding was somehow taught in schools at fifth form level... Since the majority of the pupils would sooner or later be subject to PAYE, it wouldn't have taken too much effort at that young age to give them a basic understanding of allowances, and how the coding system worked.
Needless to say, it fell on deaf ears....
Mrs Meeja obviously deals with accountants on a daily basis, and I have to say, that whilst she doesn't always agree with comments that you make (She lurks on PH!), she always makes a point to me that 'Eric does know his stuff, and he also understands HMRC and it's failings... And his advice is almost without failing the correct advice'
Which from her, is praise indeed!
OP... If Eric is offering (unpaid) advice about how to deal with HMRC, it will be good advice.
roachcoach said:
One last question - no matter the outcome here, I'll have to pay something back.
Am I right in saying if I elect to simply pay directly (as opposed to letting them bugger my PAYE code), I'll need to do a tax return for the trouble?
No, you can make a payment directly without needing to complete a tax return.Am I right in saying if I elect to simply pay directly (as opposed to letting them bugger my PAYE code), I'll need to do a tax return for the trouble?
Having said that, making tax returns need not be a bad thing as the process of completing the rerturn allows you to assess where you are - and to spot problems such as this, probably much earlier than HMRC does.
Thanks.
It's more the hassle involved of digging out all the crap of the day/trying to remember gift aids etc. I can live without all the trouble, but I think in my current circumstance it's going to be far more beneficial to leave the tax code alone and pay it in one whack.
To update the topic, my tax code has been altered over the years to account for the employers loan, but obviously not enough so I'll be getting that letter drafted and fired off asap.
It's more the hassle involved of digging out all the crap of the day/trying to remember gift aids etc. I can live without all the trouble, but I think in my current circumstance it's going to be far more beneficial to leave the tax code alone and pay it in one whack.
To update the topic, my tax code has been altered over the years to account for the employers loan, but obviously not enough so I'll be getting that letter drafted and fired off asap.
Eric Mc said:
No, you can make a payment directly without needing to complete a tax return.
Having said that, making tax returns need not be a bad thing as the process of completing the rerturn allows you to assess where you are - and to spot problems such as this, probably much earlier than HMRC does.
Correct and 100% agreedHaving said that, making tax returns need not be a bad thing as the process of completing the rerturn allows you to assess where you are - and to spot problems such as this, probably much earlier than HMRC does.
Sorry to thread hijack.
I have just received a letter saying I owe around £650. However, in March of last year (2011)'s paycheck I got a rebate for that year after phoning and getting them to check my tax code. (I had two jobs, and I was getting taxed Basic Rate on my entire earnings of the higher paid job).
All the time they were aware of my situation... Now I feel I've fulfilled my half of the bargain by keeping them in the loop about every change in situation... is it worth attempting to fight... (now I've got the money still in a savings account so I'll be able to pay it back). I just feel a bit aggrieved, probably understandable when you get told you owe money!
I have just received a letter saying I owe around £650. However, in March of last year (2011)'s paycheck I got a rebate for that year after phoning and getting them to check my tax code. (I had two jobs, and I was getting taxed Basic Rate on my entire earnings of the higher paid job).
All the time they were aware of my situation... Now I feel I've fulfilled my half of the bargain by keeping them in the loop about every change in situation... is it worth attempting to fight... (now I've got the money still in a savings account so I'll be able to pay it back). I just feel a bit aggrieved, probably understandable when you get told you owe money!
ColuGav said:
Apparently I've just not paid enough despite them assessing that I was entitled to a rebate...
No tax code altering benefits, just 2 jobs..
But why?No tax code altering benefits, just 2 jobs..
What is the ACTUAL reason why you haven't paid enough tax?
What was your correct tax coding for the relevant tax year and how was the coding divided between the two jobs?
If the coding was correct, if it had been allocated correctly between the two jobs you should have paid the correct tax. Did HMRC, by any chance, allocate a full personal tax allowance to BOTH employments?
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