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Wrong tax code applied - 11/12, 12/13 - whose liability?

Wrong tax code applied - 11/12, 12/13 - whose...

Hi, hope someone will be able to clarify my position and provide insight on who is liable for approx £10k of tax due to a coding error.

In 2011/2012 I was on a tax code 707L despite being on a basic in excess of having any personal allowance. Hence, on filing SA, accountant identified an additional liability on the personal allowance.

In 2012/2013 I was on a tax code 808L despite being on a basic in excess of having any personal allowance. Hence, another tax liability incurred during SA. 

2011/2012 was filed late, hence, some argument that HMRC not 'aware' to issue a new tax code for 2012/2013....or?

My employer for those years was fully aware of my income situation hence, I find it absurd they would have used these tax codes. Naturally, I assume some responsibility for the error, but tax codes are not included on my pay slips so hard to spot until P60 time, and HMRC coding notification were sent to an old address.

HMRC over the phone, advised to send in a letter with P60's and P11D's for both years and they will investigate.

For 2013/14 I have been on the correct tax code for my circumstances.

Who will be liable for the underpayment for 11/12 and 12/13?  Myself or Employer? 



Thanks for all the input below - seems unanimous! HMRC asked me to write in with the key facts, dates and forms - I actually called back HMRC to make sure it would be a productive task, not a forgone conclusion. Maybe it's simple protocol.

The outstanding tax has already been paid in full, but will follow through as per HMRC advice.  

As everyone has been very helpful with their input, I'll come back tot this post to share the response from HMRC in approximately one months time. 


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By Wieslaw
09th Feb 2014 10:09

How is employer liable?

I assume the employer paid you the net amount based on the incorrect tax code, therefore you had the benefit of the extra money? It is you that owes the unpaid tax to HMRC....

Thanks (8)
By Flash Gordon
09th Feb 2014 10:41

Employer uses tax codes given

The employer is supposed to use the tax codes given to them by HMRC, not look at every employee's personal situation and judge whether the code is appropriate. They've obviously followed HMRC's codings and are therefore not part of the equation here. 

If it was so absurd that they used these codes then how come you didn't spot that the tax deducted from your salary wasn't at the level you'd have expected? You could have then checked what code was being used and asked HMRC.

And you didn't tell HMRC that you'd moved so when they sent out the codings you didn't receive them (post redirection?). Well that's on you too I'm afraid. HMRC did their job by advising you (or was it also absurd that they hadn't realised you'd moved?)

You owe the tax based on your income. So pay up and learn from your mistakes and stop looking for someone else to blame.

Thanks (8)
09th Feb 2014 20:30

It's a fair comment as

Thanks all

Thanks (0)
09th Feb 2014 11:05

HMRC will state that you should have known that the tax deducted was incorrect and therefore this will be down to you. You might try appealing but I doubt you'll win

Thanks (2)
09th Feb 2014 14:36

Employer not liable

As mentioned above, the employer is required to use the code issued by HMRC.  It is not their job, responsibility or liability to check them.  They will obviously know what your salary is, but there are many other things which can affect a tax code which are not related to salary, eg tax underpayment adjustments, pension deductions, gift aid relief, adjustment for tax on other income outside of the employment which is not taxed at source.  your employer will simply have received a notification of your code with no explanation of how it is made up as this is not any of their business.  This is between you and HMRC. 

There is no requirement for HMRC to deduct the correct tax at source during the year, although they (sometimes) try to.  Any under or overpayments are dealt with by way of direct assessment by HMRC or via self assessment after the end of the year.  it is your liablilty and you have to pay it.

A PAYE code is only ever an estimate, especially when benefits in kind are involved as HMRC can't possibly know in advance what your medical or fuel card benefits or anything similar to that will be for next year, and they will estimate it using the previous year's figures.  So if your benefits and salary are generally increasing, you will probably ALWAYS owe some tax at the end of the year.

You need to check your PAYE codes when you get them and contact HMRC if you think they are wrong.  Your accountant does not get copies of these so you need to send him a copy if you want him to check them for you. 

Thanks (2)
By Locutus
09th Feb 2014 15:33

It's your liability
Providing that your employer used the PAYE tax codes that HMRC advised them to use then your employer has no liability whatsoever, even if they had reason to believe that the tax codes were wrong.

Any discussion about the amount of the PAYE tax code is strictly something between you and HMRC.

It is actually quite common for someone who is employed and who also has untaxed other income (which it sounds like you have) to have a tax liability under self assessment.

You will just have to get used to the fact that every 31 January you will probably have a balancing payment of tax to pay, to "square up" the tax liability for the year.

Thanks (1)
09th Feb 2014 16:26


I agree that the employer is in no way liable for the underpayment here, unless they failed to operate the codes issued to them by HMRC, or failed to calculate the correct amount of PAYE based on the latest code.

I am not clear if HMRC sent the coding notices to a new address that they hadn't been informed of (as some here have assumed) or if HMRC just sent them incorrectly to the old address. If it was the latter then this helps your argument that you were not at fault.

I think this leads on to the question of whether ESC A19 is in point.  This will be dependent upon what information HMRC had to act upon and when.

As the 2011/12 tax return was submitted late then it must have been submitted between 1 February 2013 and now. If it was submitted on 1 February 2013 then that is of course the 2012/13 tax year. HMRC should have either issued a tax code or sent a tax calculation for the above receipt of information before 5 April 2014 which is 12 months after the last day of the 2012/13 tax year.

As they seem to have done that, I do not think there is an argument for ESC A19 either unless perhaps there are exceptional circumstances we don't know about.


Thanks (1)
09th Feb 2014 20:27

Thanks for your reply, no exceptional circumstances - as per my updated original post, will report back with HMRCs response in approx one months time.

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