P11D Help!

JamesB

Good morning,

I have a friend who is employed by a large plumbing company.

He received a letter from HMRC saying he owes £450 in under-paid tax.

They are saying this is due to a van benefit, where no tax had been paid on it.

The benefit was £2,250 and was included on his P11D which the company filled out and submitted.

My question is:

1) Was it the company who had the responsibility to deduct this tax from his net pay?

2) If so are they liable to pay this or is it down to the employee (who has sinced left the co).

As a summary here was what they sent him:

PAYE income £13,290
Van Benefit £2,250
Total £15,540
PA £(6,035)
Taxable £9,505

@ 20% £1,901

Tax paid £1,450 (£13,290 - £6035 x 20%)

Under-paid £451


If anyone could help it would be much appreciated.

J

Bluewednesday

It's not the employers responsibility it's the employees, he should have queried not being deducted tax for a taxable benefit, harsh I know!

It will only be the employers fault if they were sent the tax code and didn't adjust it.

Which year are we talking about?

jamesm96

There is an Extra-Statutory Concession for cases where tax has been underpaid. Basically, if an individual underpays tax and HMRC fail to inform the taxpayer about the underpayment within 12 months of the end of the tax year to which the underpayment relates then you may be able to get the amount written off. There are some pretty strict criteria but it's always worth checking. It's ESC A19, here: http://www.hmrc.gov.uk/esc/esc.htm

Failing that, HMRC's own guidance in the PAYE manual (here: http://www.hmrc.gov.uk/manuals/pommanual/PAYE95011.htm) states (and this is intended for HMRC's own inspectors) that 'if you discover that the underpaid tax has occurred because of an employer error and not because of HMRC failure to make proper and timely use of information, then the employer should be pursued for payment of the tax.'

Now, I would say that there is a separate guidance at PAYE90020 (here: http://www.hmrc.gov.uk/manuals/pommanual/PAYE90020.htm) and also Regulations 72(5) and 81(4) of the Income Tax (PAYE) Regulations 2003 (sorry to be all technical, I just find having good references helps!). Basically, this guidance says that if the employer can demonstrate that they acted in 'good faith' in making the error, they'll be let off.

The likelihood is that the taxpayer will have to foot the bill, but you can certainly try the above!

JamesB

Thanks guys (as always). I really hope one day I will be able to give to the website as much as you lot do, instead of being the one doing the asking all the time!!

The tax year is 2008-09 and HMRC correspondance is dated 27/12/2010.

He also recevied the same thing for 2009-10 on 27/12/2010.

Can someone explain how this would have been added to his payslip etc.

Eg for 2009-10 the P11D would/should have been calculated by Jul-10 at the latest. This came out @ £2k. How would this have been incorporated to deduct the 20% tax?

J

jamesm96

JamesB wrote: »

Thanks guys (as always). I really hope one day I will be able to give to the website as much as you lot do, instead of being the one doing the asking all the time!!

The tax year is 2008-09 and HMRC correspondance is dated 27/12/2010.

He also recevied the same thing for 2009-10 on 27/12/2010.

Can someone explain how this would have been added to his payslip etc.

Eg for 2009-10 the P11D would/should have been calculated by Jul-10 at the latest. This came out @ £2k. How would this have been incorporated to deduct the 20% tax?

J

HMRC should have adjusted his tax code based on the P11D information and given it to his employers on the 'notice of coding' so that they can deduct the right amount of PAYE through the payroll.

Looks to me like he might have a case under the ESC, especially as they have failed to use information 'in a timely fashion' on more than one occasion. However, there are (unsurprisingly) lots of caveats to the ESC and one of them is that not everything counts as 'information' as far as the concession is concerned. I know that a P14 doesn't count, but I believe that anything which directly affects the tax code does count. Certainly they haven't let him know within the twelve months... I reckon you might have a case there. It's not easy to fight though, be prepared to send lots of letters over the next few months! (I'm still liaising with HMRC over a claim I put in back in March 2010!)

deanshepherd

Do vans need notification straight away (like cars do) in order that tax codes get adjusted immediately?

If vans do then it is worth checking if employer did send the form or not.

jamesm96

deanshepherd wrote: »

Do vans need notification straight away (like cars do) in order that tax codes get adjusted immediately?

If vans do then it is worth checking if employer did send the form or not.

Actually, cheers Dean, I'd overlooked one of the technicalities... One of the caveats on the ESC is that HMRC must have failed to use the information within one year of the end of the tax year during which said information was provided. If no immediate notification is given and it just goes on the P11D at some point before 6th July (say, on 5 July 2010, for benefits provided during 2009/10) then the information is technically provided during the 2010/11 tax year, meaning HMRC have until 5 April 2012 to inform the taxpayer of the underpayment.

MikeHelm

He is still liable to pay HMRC Tax on the P11D benefit