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Client underpaid PAYE due to employer not filing P46(car)

Background:  I was approached by an employee of a UK plc business because he received a series of P800 calculations dating back to 2003/4 and showing underpaid tax of over £8k.  In this time the client has only ever been employed - no sole trader business, rental business or directorships.

In short, the sort of personal who shouldn't ever underpay tax as everything should be dealt with through PAYE.

The issues up to 2007/8 (with a previous employer) led to overpaid tax as a result of certain BIKs being withdrawn.  We're not too concerned about the overpayment.

However, in 2008/9 he moved to his current employer.  This is when the large underpayments started.  We have established with reference to his P60s and P11Ds that the underpayments were due to his company car benefit not being taxed through PAYE.  Further investigation has uncovered that his employer failed to send a P46(car) when his company car (and later his fuel card) were issued.  As a result HMRC never changed his tax code, resulting in large underpayments of tax. 

The 2008/9 underpayment was £2k, 2009/10 underpayment £3.3k.  We've just had to file a self assessment return for 2010/11 and the underpayment was £4.5k.  In Feb 2011 HMRC made a demand for the underpaid 2008/9 tax which the client wrote a cheque for (incidentally this was not allocated to his account until we queried this last month).

So, in short, my client owes £7.8k for 2009/10 and 2010/11.  We've not had the 2011/12 P11D yet but it looks like the correct tax was taken at source (he changed his car early in the tax year and so maybe a P46(car) was filed this time).

We don't dispute that the tax has been underpaid.  I doubt we'd get an ESC A19 claim through as the P46(car) seemingly was never sent to HMRC.  Having said that. given that HMRC were receiving P14s and P11Ds might there be a case?  Assuming we don't have a claim here, the cause of the underpayment lies squarely with the employer in my opinion.

In other people's experience, do employers tend to acknowledge their mistake and sort the unpaid tax themselves or do they go 'oops - sorry about that, but it looks like you're on the hook for a large unpaid tax bill.  Yes it's our mistake, but you owe it - hope you can afford it'#

Are there any options to agree with HMRC to collect this through the tax code over two or more years if the employer won't help?  An extra £8k in this tax year would seriously hurt the client

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By cfield
07th May 2012 10:11

ESC A19

You could have a go at ESC A19 for the earlier years, since as you say P11Ds were filed and HMRC were aware of the benefit. However, I wouldn't hold your breath as this only applies if the taxpayer was genuinely unaware that any tax was due. I think most people know that company cars are taxed so he might be on shaky ground here.

Also, the onus is on the taxpayer to request a tax return if they know tax is still owing. They can't just sit and wait for HMRC to send one.

Don't forget to claim business mileage at the advisory fuel rates. Might be hard working this out now if no records were ever kept, but you should be able to get away with reasonable estimates based on total mileage and regular journeys.

You should also dispute any penalties or interest as it was mostly the fault of the employer and HMRC.

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07th May 2012 18:51

Employer error

You can also approach HMRC and make a claim for employer error - reg 72.

You mention P800s going back to 2003/4. HMRC can now only claim tax from 2008/9 onwards unless tax returns have been issued. However from what you say 2008/9 is the main year.

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