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PAYE under-deducted

PAYE under-deducted

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A very large employer under-deducts PAYE due to cumulative pay crossing the personal allowance threshold (£112,950) towards the end of the tax year in March 2011. The employee was given a one-off bonus in March 2011. The tax code was correct.

The employer has a large number of employees crossing this threshold.  So has the employer failed to 'take reasonable care' to ensure proper deduction of PAYE?

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By Rammstein
08th Jun 2012 08:31

Nope

The employer has deducted PAYE based on the tax coding it held at the time.  It is not the job of the employer to check if the tax coding is correct, it is the job of the employee.  I wouldn't expect it would occur to the employee that they should have contacted HMRC before the bonus was paid so the underpayment is only highlighted when HMRC pick up on it.

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By Chris Wise
08th Jun 2012 08:41

PAYE

the employer isn't authorised to operate a new code because they "know" the employee is no longer entitled to the PA. Nor are they obliged to contact HMRC to ask for a revised code (indeed HMRc probably wouldn't speak to them without a 64-8 for each individual). so I don;t see how they can be said to have not taken reasonable care. the tax deducted is correct presumably as per the code issued, self assessment will pick up the slack.

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By neiltonks
08th Jun 2012 09:19

Not employer responsibility

Agree with the others - any change to tax code to allow for the reduction in personal allowance is a matter for the taxpayer and HMRC to sort out. The employer has no special  responsibilities in this area.

It has to be this way because the decision on the tax code is based on the taxpayer's total net taxable income during the tax year, not just income from employment, and the employer doesn't know the overall picture. Employers just process the tax code notified by HMRC, as with all other employees.

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Tom McClelland
By TomMcClelland
08th Jun 2012 10:02

What they said.

Yes, the employer has acted correctly. The specification for calculating PAYE contains no reference to the clawback of personal allowance above £100,000 which is not the employer's responsibility.

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