Share this content
8

HMRC tax calculation very wrong

HMRC tax calculation very wrong

Didn't find your answer?

I have a 2010-11 P800 for a taxpayer who has income in excess of 150k.

They have given him a personal allowance.
They have taxed all income above basic rate at 40%.
They have given him a refund.

My tax software has taken his PA away, and taxed at 40% and 50%.
I've double checked the tax rates for that year and yes, no PA and additional rate 50% applies.
I calculate tax due.

Has anyone else had HMRC make such a calculation? Is there anything I can do other than upset the client and give him the bad news?

Replies (8)

Please login or register to join the discussion.

avatar
By The Innkeeper
20th Jul 2012 14:05

regretfully

no

Thanks (0)
avatar
By Paula Sparrow
20th Jul 2012 14:26

I am sure

I recall a very similar post on here a few days ago

Thanks (0)
avatar
By Shirley Martin
21st Jul 2012 14:15

One for the Working Together e-group?

There has been a similar case on the Tax Faculty's website and I have had a look at the HMRC website for clues on this.  This is what I found.

When NPS went live in 2009, during the 2009/10 tax year, the highest rate of tax was 40% and there was no income based reduction in PA.  So NPS was only programmed to deal with 40% tax and full PA.

The 50% tax rate was then announced but, as was well documented at the time, the NPS software was not updated to reflect this change for the purpose of issuing codes.  Unfortunately the links to this part of HMRC's website no longer work but HMRC's website does have the following section
 
http://www.hmrc.gov.uk/incometax/codes-basics.htm

This says “ your tax code won't have taken into account the 50 per cent additional rate and your tax deductions may not be accurate. HMRC will work out how much tax you are actually due to pay when you send in your 2010-11 tax return. This may mean you'll owe some extra tax or you'll be due a refund.”

This section also says “Since the 2010-11 tax year, your tax code takes account of the income-related reduction to the Personal Allowance based on an estimate of your income. HM Revenue & Customs (HMRC) will work out the actual amount of Personal Allowance you are entitled to (if any) when you send in your 2010-11 Self Assessment tax return.”

The HMRC website does not explicitly say that the limitations on what NPS could do with the codes for 10/11 also apply to the P800 calculations.  But from your example, and the one on the Tax Faculty's website, it would appear that it does.

HMRC's solution seems to have been to rely on the fact that any individual in this tax bracket would be submitting a Self Assessment tax return.

I think that this would be a good one for AWEB's HMRC Working Together e-group.  Do you agree?  If so, I'll try and put something on there and see if AWEB can get confirmation of how the 10/11 calculations work for 50% taxpayers.

Are you going to be doing a Self Assessment tax return for your client?

Kind regards

Shirley

Thanks (1)
Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
23rd Jul 2012 09:39

Thanks Shirley, that's really, really helpful! And staggering....

Yes, I'm doing a tax return for him so it will all come out in the wash, but I think we really do need to follow this up with Working Together, as this is just plain unacceptable.

Thanks so much for looking into it further (and indeed finding far more than me!)

Thanks (0)
Replying to stepurhan:
avatar
By david5541
08th Aug 2012 13:05

p800 corrections

Monsoon wrote:

"Thanks Shirley, that's really, really helpful! And staggering....

Yes, I'm doing a tax return for him so it will all come out in the wash, but I think we really do need to follow this up with Working Together, as this is just plain unacceptable.

Thanks so much for looking into it further (and indeed finding far more than me!)"

 

make sure hmrc do make a correction that links the self assessment with the p800- if he has been repaid tax by the p800 this needs to be included in the self assessment

Thanks (0)
avatar
By halblackburn
23rd Jul 2012 21:19

Get the repayment warrant !

If the repayment has been made to the client in the form of an HMRC warrant make sure you get the warrant from the client before he/she banks it; send it back to HMRC to be cancelled.  This will prevent/reduce any late payment interest arising within the SA system.

Thanks (0)
avatar
By Shirley Martin
24th Jul 2012 11:21

Now in the HMRC WT e-group

I have now put a post in the discussion group HMRC Working Together e-group under the title 50% taxpayers and P800 calculations.

Hopefully we can get confirmation from HMRC on this.

Kind regards

Shirley

Thanks (1)
avatar
By Paula Sparrow
25th Jul 2012 09:53

Kind of makes a mockery

of the ESCA19 applications being rejected on the grounds that the taxpayer could have worked out for themselves that there was an underpayment when HMRC spend millions on computers and have staff working with tax on a daily basis but are still unable to issue an accurate calculation

Thanks (2)
Share this content

Related posts