Will a Claim for Overpayment Relief be successful??

Will a Claim for Overpayment Relief be...

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New SA client has asked me to act for him due to high Underpayments of £1597 on 2011TR, £6843 on 2012TR and a further £6562 on 2013TR submitted himself. Upon investigation there has been a catalogue of errors in the PAYE Coding Notices for each year, some due to HMRC, some due to questionable reporting of Benefits by Employer, including changes of Employer, and client wants me to make an Overpayment Claim against HMRC for their errors.

Briefly, clients Basic salary of approx. £84k supplemented by variable bonuses per annum so income for last 4 years has been £111k in 2010 £132k 111K and 95K in 2013 plus car benefits each year so the Personal Allowance is either restricted or not available.

The main reason for the large underpayments has been that the Full personal Allowance was given in Codes for both 2010/11 and 2011/12 for whole year when not available due to Income limit and a withdrawal of Company Car benefit in 2012/13 Code when Car was available all year and HMRC were told the full details of Car.

Whilst there have been a number of errors over the 3 years involved, some of which can be attributable to HMRC errors in Codings I am not sure whether these should just be put down to circumstances, and make sure they do not happen in the future, or whether a Claim for Overpayment Relief should either be made or would be successful.

Any thoughts would be welcome.

Replies (8)

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By occca
03rd Apr 2014 10:52

?

But he still owes the money doesn't he?

No payroll system that I know of copes with the removal of the annual allowance - every client we have had who has earned this amount has had to pay what is due

Re the company car, the client should have noticed that this had been omitted from his code and queried it at the time

Sounds like you would be wasting your time to me, unless I have misunderstood the OP

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By K81
03rd Apr 2014 10:59

on what grounds

What would you be claiming overpayment relief on?

Are the tax returns incomplete. If not & the tax returns are correct you have no grounds to claim anything.

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RLI
By lionofludesch
03rd Apr 2014 11:00

Forget the Codings

I found your OP quite difficult to follow.

Nevertheless, what you need to do is work out how much his correct liability was for each year and compare it with the tax actually paid.

Forget the coding restrictions - they're not about assessing tax, they're about attempts to collect it, often with incomplete or inaccurate information.

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By possep
03rd Apr 2014 11:02

?

I assume you are referring to a claim for overpayment relief under Schedule lAB Taxes management Act 1970. However this refers to claims made outside the usual timescale for amendments to tax returns. Rather than expanding on this I would mention that the client does not appear to be due any repayments! You may be getting confused with ESC A19 as HMRC were apparently advised of the change regarding the company car. However there will seemingly be little chance of a claim here.

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Stepurhan
By stepurhan
03rd Apr 2014 11:12

Tell them to take responsibility

They have received a large cash salary and benefits on top, so they are not exactly scraping by. Tax returns will have been due for all three years, so three opportunities to note underpaid tax at least. Payment of the underpaid tax should also have been made. It would appear your client has ignored this entirely, despite the fact that even the HMRC online software should have informed them of the tax due.

Despite having a high income, your new client has apparently also decided that paying an accountant before now was a waste of money. If the return would only include employment income and benefits, then the fee would probably have been quite low. Any competent accountant would also have been able to address the coding issues in year. Presumably the client has just blandly ignored the coding errors as well.

The "catalogue of errors" seeks to point the blame at anyone but the taxpayer themselves. Coding errors simply mean the wrong amount of tax is taken up-front, but have no effect on the actual liability itself. Your client will have been alerted to issues prior to now, but has clearly taken no action to rectify matters. Time they took some responsibility for themselves.

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By ernie222
03rd Apr 2014 11:52

Thanks for replies

Thanks for the replies.

I had considered that any Claim, whether by Overpayment Relief or ESC A19, would be a waste of time but thought I would just ask the question in case there might be some claim but you have just confirmed that I was correct in the first place.

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By johngroganjga
03rd Apr 2014 12:14

Any PAYE coding errors are washed out by a full tax return, which you say your client has completed for all relevant years.  So the only consideration now is whether your client's tax returns were wrong and, if so, what can or should be done about it.  PAYE coding issues are irrelevant.

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By Chris08
03rd Apr 2014 13:17

I doubt any success

With the work I do for a charity, I come across a lot of PAYE underpayments.

You need to explain to your client that PAYE is only a collection process, not an assessment process.  Therefore it cannot guarantee the correct taxes are deducted.

So the starting position is always that if as a matter of fact there been an underpayment of tax, HMRC must seek collection from the taxpayer - in this case through Self Assessment. And if we follow the money, as the taxpayer received more in his salary than they ought from the employer, he is the one holding it.

Possible defences are employer error or A19. 

Employer error is often difficult as HMRC need to be demonstrate not only that the employer made a mistake, but that they did so because they were careless in their operation of PAYE. And even when employer error is proven, more and more employers are simply turning to the taxpayer and asking for the overpaid salary back.

For A19, taxpayer would need to demonstrate that HMRC had the necessary information available to have ensured correct tax codes were issued. I am not convinced that is the case here, although P46(car) would count.  Even then, HMRC almost always deny A19 for any higher rate taxpayer, on the grounds that they ought to have known they were not paying enough tax.  There will need to be an exceptional reason why your client did not realise his quite substantial employment benefits were not being taxed - simple ignorance will not be enough, as HMRC believe everyone should know Company cars are taxed and with the tax on cars being so big, should notice when they are not.

And to reiterate what has been said previously, overpayment relief is not in point. That is a claim that is made to correct an error on the tax return. As the tax return reflects the actual income earned, benefits received and tax deducted it is correct.

Your client needs to accept that he has not paid enough tax, and negotiate a time to pay arrangement with DMB.

 

 

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