Incorrect PAYE code operated?

Incorrect PAYE code operated?

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An employee client joined a new employer in 2003/04. His 2003/04 P45 indicated a code previously operated of 461L. This has been increased each subsequent tax year by reference to the budget changes. Neither the client nor the employer has received a coding notice.

One month later in 2003/04 the client reached 65. No ee's NICs were deducted.

The client was already in receipt of a small private pension for which a coding notice has been issued (restricted by the state pension).
An employee client joined a company in 2003/04 and gave his new employer a P45, which
Was the employer under a duty of care to at least query the standard code as a result of the client reaching 65? In otther words did the employer take reasonable care in operating PAYE?

The tax underpayment amounts to over £4,000; is this the employer's liability?
Daren Peacock

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Euan's picture
By Euan MacLennan
10th May 2007 12:06

Employer not at fault
... unless they failed to submit the new employee's P45 to the Revenue.

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Euan's picture
By Euan MacLennan
11th May 2007 16:03

Looking for someone to blame, Daren ?
It is not the employer's fault - as we have all said, they are required to operate the PAYE codes given to them on forms P45 and P6 coding notices and apply the annual uplift on the P9X. They are not allowed to have information on an employee's other income and they are under no duty of care to query the code with either the Revenue or the employee. They did well to put him on NI Table C when he reached 65.

It does not seem to have occurred to you to suggest that the private pension payer should have queried the PAYE code they were given, but it is no more their fault than the employer's for the same reasons.

The Revenue, perhaps? It may well have been an oversight by the PAYE district dealing with his private pension payer not to have searched for a continuing employment under a different PAYE district, but don't they usually send out pension enquiry forms to taxpayers when they reach pensionable age? What did your client say on that form or did he just not bother to reply?

What about the client? He received a PAYE coding notice for his private pension. Didn't it occur to him to query why he was being given the personal allowance twice? Perhaps, he just thought that it would be nice to pay less tax than he should? As JoSie has pointed out, he has had the benefit for the last 3 years. Well, now it has caught up with him.

What about you, Daren? You say the employee is your client. If you had filed a 64-8, you should have been sent a copy of his pension PAYE coding notice and could have spotted the mistake. Indeed, why does an employee need an accountant? Obviously, not to prepare accounts so it can only be tax returns each year. Didn't you spot the underpayments?

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By User deleted
11th May 2007 00:13

Definitely not the employer's concern
The employer will have followed the rule book to the letter; it's not for them to query tax codes; it's for HMRC to issue them.

I presume from the timescales that repeated error isn't a possibility?

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By User deleted
10th May 2007 12:45

65 is not relevant
There is no "magic" cutoff at 65 whereby the employee would automatically receive a pension and his code would need to change so unless HMRC issued a coding notice which the employer ignored he is not at fault.

After all, it is the employee who has had the money!

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