P800 query

P800 query

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My client has just received a P800 showing underpaid tax of £546 for 2007-08. This arose because one of the 3 paye income sources did not operate the code issued by HMRC properly. My client could not have been expected to be aware of this in the circumstances. This situation is not mentioned in "What counts as information?" in HMRC guidance. I think HMRC should have picked it up when they recorded the P35s and the deadline for using this information is 5 April 2009. Therefore, ESC A19 applies and HMRC should agree not to collect the tax.  Any comments please?

A further point of interest: the P800 says the underpayment will be coded "in 2011". Client has now received a letter asking how she would like to pay, lump sum or coded.

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By glynisbm
04th Apr 2011 13:58

Tax underpaid

I suppose legally, for payroll items, the employer is liable for the tax and NI due.

However, the employee is obliged to inform HMRC of any change in their income or circumstances even if they are not sent a tax return.

So how to show the employer was at fault?

Ask your client if he can remember completing a form P46 when he commenced employment (as presumably he had 3 seperate income sources at any one time)Did he receive a P60 from each employerWrite to

Customer Operations Employer Office
BP4009
Chillingham House
Benton Park View
Newcastle
NE98 1ZZ  and establish if a P6 Notice of Coding was issued to the employer and if so the date. If one was not issued, why not!

Once you are armed with this information, you will find it easier to establish culpability. If the employer did not provide a P46 for competion or act upon a coding notice then they are at fault. This was further compounded by the fact that HMRC did not pick up on the coding issues as if they had been aware that there were 3 sources of income, they should have allocated the allowances and issued coding instructions to the subsidiary sources of income. Your client could argue that he had a reasonable belief that his tax affairs were in order; this is sometimes more difficult to prove in those cases where the individual is a represented tax payer.
 

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By Steve Knowles
04th Apr 2011 14:25

PAYE code operated incorrectly

It is not clear whether the Revenue issued the correct code, which was then operated incorrectly, or whether the incorrect code (or no code) was issued by the Revenue.

ESC A19 will only apply where the Revenue have been at fault in not acting on the information available, ie where they have issued an incorrect code, or have failed to issue a correct code to different employments.

If they have issued the correct code, they have not been at fault; in that situation you need to look at the code that was actually used by the employer - was it the code issued, but operated incorrectly - wrong rates? - or did the employer use a different code, perhaps rolled forward from a previous year? If the correct code was used, but operated incorrectly, the client can justifiably have believed her affairs to be in order, and the Revenue should go for the additional tax from the employer.

However if the code used (and shown on payslips/P60) was different from that issued by HMRC, this will not work, as from the Revenue's viewpoint she should have been aware that the wrong code was being used, and should have advised them accordingly.

 

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By rota2
04th Apr 2011 16:31

Tax underpaid

Thanks for responses. Taxpayer gave P45 from employment that ceased in year to new employer in year, who did not properly apply tax code issued for new employment, resulting in underpayment on new employment. P60 received from new employer with P45 figures correctly shown. The P60 from new employer shows tax code issued by HMRC, but it could not have been applied correctly because the tax deducted is far too low. The taxpayer was not represented at that time and in view of the complexities I do not think could have been expected to be aware of underpayment because the correct tax code was shown on payslips. The employer did not collect the correct tax, but should HMRC should have made use of the information from the P60 by issuing P800 promptly? If so does ESC A19 apply?

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By rota2
04th Apr 2011 16:40

PAYE code operated incorrectly

Thanks for responses. Employer did not apply tax code issued by HMRC correctly. The underpayment could only have been identified by HMRC by preparing a P800. Does ESC A19 apply here?

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