Tax Writer
Share this content
Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
ridvan_celik

Taxpayer faces £132,600 tax bill after PAYE errors

by

The employer operated a BR code for an additional rate employee, but the individual ignored both the offer of free professional tax advice and an interest-free loan to settle the tax underpayment. 

10th Sep 2021
Tax Writer
Share this content

Facts

In January 2010 Bruno Giuliani commenced employment with an investment bank (unnamed in the decision).

The bank requested a form P45, and the FTT found, on the balance of probabilities, that Giuliani had submitted this form to the bank shortly after commencing employment.

However, the bank operated a basic rate tax code for him until April 2011, despite his income exceeding £150,000 and being subject to additional rate tax. This resulted in an underpayment of tax in both 2009/10 and 2010/11, as no higher nor additional rate tax was deducted.

Register for free to continue reading

It’s 100% free and provides unlimited access to the latest accounting news, advice and insight every day. As well as access to this exclusive article, you can:

View all AccountingWEB content
Comment on articles
Watch our digital shows and more

Access content now

Already have an account?

Replies (12)

Please login or register to join the discussion.

avatar
By GR
10th Sep 2021 13:18

The tax years in questions seem to be pre-RTI.

I don't think an error on this sort of scale could happen now pay info is submitted in real time.

The tax payer made a huge error by submitting incorrect tax returns.

Thanks (1)
avatar
By More unearned luck
10th Sep 2021 18:09

I'm reminded of Hilaire Belloc's cautionary tale of Lord Finchley - serve them both right! The fees paid to an accountant to prepare his tax returns would have been minimal compared to his counsel's fee and probably less than the interest charge.

What is curious is the lack of any mention of penalties.
HMRC maintained the taxpayer was careless to validate the assessments, if they truly believed that then you would expect a penalty assessment alongside of the DA.
If no penalty assessment why didn't he pray in aid that or conversely if there were penalties that the taxpayer had accepted, regardless of any suspension, why didn't HMRC pray in aid that fact.

Thanks (2)
Replying to More unearned luck:
avatar
By Hugo Fair
10th Sep 2021 22:54

I know it's not relevant to this thread (or your apposite post), but mention of Hilaire Belloc reminded me of that more acerbic author, Harry Graham, who at a similar time published Ruthless Rhymes for Heartless Homes - including the memorable:

My son Augustus, in the street, one day,
Was feeling quite exceptionally merry.
A stranger asked him: “Can you show me, pray,
The quickest way to Brompton Cemetery?”
“The quickest way? You bet I can!” said Gus,
And pushed the fellow underneath a bus.

Whatever people say about my son,
He does enjoy his little bit of fun.

Thanks (4)
avatar
By Paul Crowley
10th Sep 2021 20:37

The employer informed him upon discovery of the error
He ignored the advice and submitted blank returns
Zero sympathy
Well as Dell boy might say
Rodney you are a plonker

Thanks (4)
Replying to Paul Crowley:
avatar
By NotAnAccountant2
11th Sep 2021 07:50

Paul Crowley wrote:

The employer informed him upon discovery of the error
He ignored the advice and submitted blank returns
Zero sympathy
Well as Dell boy might say
Rodney you are a plonker

While I also have no sympathy on him having to pay the tax, I went and found the ruling and skimmed though it.

There was definitely questionable behaviour on both sides. The court found that he did deliver a P45 (or possibly P46) when he started work and the bank lost it. HMRC pushed the line very hard that it was entirely his fault this mistake had occurred and that it wasn't credible that he'd delivered a P45 to the bank despite there being another 300 odd employees that the same problem appears to have happened for.

Additionally, when he was asked to submit a P46 15 months later, he asked which box he should tick as he was no longer a new starter (a question I thought was completely understandable - am I filling this form in as a new starter - and so I've had two employers in the year, or am I filling it in for this tax year, in which case I've only had one) and again, HMRC tried to use that question to imply that he couldn't possibly have submitted a P46 originally because he didn't ask the same question then (The judge did say that answering the questions originally wouldn't have given rise to the question that was asked due to filling it in over a year later but I think HMRC were disingenuous to raise that at all)

It appears that the taxpayer kept meticulous records, he still had his part of the P45, the parts to be supplied to the employer were missing.

The only omission (and it's a HUGE one) was that the taxpayer didn't include his employment income on his tax return. Three things should be noted here: 1. This was the first time he'd had to do a tax return, 2. He had only been in the UK for four years by this point, and 3. He had a reasonable belief that his tax was all deducted at source.

He didn't raise this issue - but I could imagine someone in his circumstance on entering the figures into the employment page and seeing the huge tax due bill (which would also presumably include payments on account) thinking "oh, that cannot possibly be right, I must have done something wrong". However, that argument would only hold for the 2009-10 tax year. By the time he was filling in his 2010-11 tax return he already knew that something had gone wrong with his deduction of tax at source. (He submitted the return in Jan 2012 so it's not even that he did it close to the issue first being raised)

If he'd only filled in his 2009-10 tax return incorrectly I'd have had quite a lot of sympathy for him. Because he did it in 2010-11 as well I have no sympathy and I'm inclined to think of the 50K from 2009-10 that he has to pay as a penalty for the 2010-11 failings. If it had only been 2009-10 return that was wrong then I wouldn't have been surprised to see a ruling that HMRC were out of time and anyway should have chased the employer for the missing funds.

One thing that wasn't brought up at the tribunal (but I'm surprised that HMRC didn't), is that it appears he would have had a P11D. I'm looking at mine for that year now and at the top it has:
"Note to employee. Your employer has filled in this form, keep it in a safe place. You will need it to complete your 2009-10 Tax Return if you get one. The box numberings on this P11D are the same as on the Employment Page of the Tax Return, for example, boxes 13" so I'd expect him to have other documentation that he'd expect to have to enter on a tax return and you cannot enter it unless you fill in the employment pages. (I've never had an employer supply a P11D for the tax year where I've left the company even when I've explicitly asked for it so he would presumably only have a P11D for "the bank" employment - perhaps you aren't allowed to issue a P11D for an ex-employee? I have no idea how this bit is supposed to work but in some peoples case it could be a significant amount of tax at stake.)

(I've just noticed that my NI number on my P11D from that year is wrong - it has a digit missing! It was right in 2008-9 and 2010-11- same employer).

Thanks (4)
avatar
By Hugo Fair
10th Sep 2021 22:47

Without any knowledge of the people or circumstances of this case - the correlation, between those paid a lot in the City and those who believe tax unworthy of their consideration, is striking.
They can't all be related to Leona Helmsley ("We don't pay taxes; only the little people pay taxes"), can they?

Thanks (1)
avatar
By Donald MacKenzie
13th Sep 2021 10:23

How can someone earning his amount of money NOT notice that his tax bill is exactly 20% of earnings each month and not wonder why he is not being taxed at higher and additional rates?

Thanks (1)
Replying to Donald MacKenzie:
avatar
By Ian Bee
13th Sep 2021 10:59

I came across this issue about 12 years ago at a company I was working, and the HMRC inspector I spoke to informally as we were unravelling what had happened said exactly that - they would expect highly paid employees, and especially those who worked in finance - to be aware that there was an underpayment and not ignore it for years on end.

At the time I was amazed that there was no internal check at HMRC end to highlight errors like this and HMRC were supposed to be updating their systems to do so.

Thanks (0)
Replying to Donald MacKenzie:
avatar
By Paul Crowley
13th Sep 2021 14:33

I agree
Taxpayer playing a Nelson

Thanks (0)
Replying to Donald MacKenzie:
avatar
By Dr Fauci
13th Sep 2021 16:48

Because he is Italian and probably does not understand the UK tax system. Many Italians leave Italy because taxes are so high. His perception was probably that UK tax is much lower and never thought to question it.

Thanks (0)
avatar
By Wisey
13th Sep 2021 15:49

Over the years I've had many clients who believe "non-business" income and gains are irrelevant to their tax return.
Not sure what the starter form would've solved pre-RTI it wouldn't go anywhere just allowed a BR or PA culm/wk1 assumption to be made, anything else needed a P6. they did change BR to 0T as a standard but i don't recall when exactly.
Still no sympathy for him, he was offered free advice to sort it, why would you decline particularly if you'd recently moved to the UK?

Thanks (0)
Replying to Wisey:
Stepurhan
By stepurhan
14th Sep 2021 08:38

Him not taking up the free advice is really the key point.

You can just about accept him honestly believing his 2009-10 return was correct, not being familiar with the UK rules. To not take up a FREE offer to check his tax position once an issue was discovered seems foolish.

Thanks (0)