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Sam
Sam, Accountant
Category: UK Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
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Hi, I am currently very confused about my tax situation. I

Resolved Question:

Hi, I am currently very confused about my tax situation. I am on PAYE in a salaried job and pay tax at 40%. I have company benefits being a car and staff motgage so am of course subject to benefit in kind tax. However over the last 2-3 years i have had numerous changes in my tax code and have recently received a P800 from HMRC stating i owe £1200 unpaid tax for year 2009-10. I have sent them a letter questioning this as they have had my P11D information which i have a copy of which doesn't tie up with any of my last 7 or 8 tax codes going back 3 years.

Where do i stand on this, how can i get advise from a tax specialist that won't cost me a lot of money.

Thanks
Submitted: 3 years ago.
Category: UK Tax
Expert:  Sam replied 3 years ago.

Hi

 

Thanks for your question

 

 

There is not recourse against HMRC for failure to make the appropriate updates, as this also would have been your responsibility to ensure that your tax code reflected the correct benefits, and there is always a shortfall along the way, under normal circumstances, as your tax code for the present year, is always based on the previous years P11d, which appears to be the case here - that your 2009/10 code contained information relevant to 2008/2009 - and this is where the tax has fallen short.

 

Your employer is no longer obliged to inform HMRC of changes throughout the year, so this falls to you to ensure HMRC are aware of these, to ensure the correct tax is collected throughout the year.

 

Did you have a change during 2009/10 that increased the benefits provided, or maybe this matter actually relates further back. HMRC should have given you an explanation on the P800 how this unpaid tax has arisen - and you should be able to look at the 2009/10 tax codes you were issued and compare this with the 2010 P11d - and see for yourself whether insufficient benefits were included in your code.

 

I am afraid there are very little free specialist tax support services available, and those such as Tax Aid that exist are means tested (on low incomes) to help those not in a position to afford accountancy advise/representation, See link here for Tax Aid

 

So if you feel you have a good case to argue then you may need to engage an accountant, but do appeal initially yourself if you feel you have grounds to do so, but in my honest opinion, this is a new debt and the 2010 P11d would not have been sent into HMRC until after July 2010 and aside from the fact it has taken HMRC a while to get around to dealing with your P11d, you could have informed HMRC of any changes along the way to minimise this tax position, and that I am afraid is what they will argue against.

 

 

Thanks

 

Sam

 

 

Customer: replied 3 years ago.

Thanks Sam, to be honest i feared that would be the case and i am not trying to get HMRC to write off what i owe i just wnat to make sure i am paying the correct amount and no more. I am afraud i have somewhat lost faith with them and am no longer convinced my tax code is right.

 

The issue seems to have arisen from my staff mortgage rather than my car, in 2008-09 there were interest rate reductions almost monthly which seems to have created confusion which created multiple tax code changes in 2009-10.

 

How can i check back to exactly what the taxable benefit amount should have been at each point my code changes through the year. Should my employer be able to explain to me exactly how they calulated the interest difference in this period ?

Expert:  Sam replied 3 years ago.

Hi

 

Thanks for your response and I understand your viewpoint completely.

 

Your employer is unlikely to have advised HMRC of rate changes with the beneficial loan throughout the year, they would just inform the final position at the year end (so by July 2010) and they would have provided a sheet of the opening amount owed and closing amount and the rate paid, to establish where the benefit arose.

Check with your employer what they may have advised HMRC and when - incase they did in fact make quarterly submissions to HMRC. This will be easier to follow, but I would expect they just made the annual submission, and you may need to look at each tax code for the explanation of why that tax code changed at that point.

Also bear in mind that even if your employer did change the benefits advise throughout the year, that it would not have been actioned by HMRC within any defined period - so its really building any time line that the employer set - and fitting HMRC changes alongside that.

 

But the changes in the code might have been contributory from the 2008/2009 P11d, so also ask the employer for the position regarding 2008/2009 and whether changes were informed as they arose, or again whether just the annual P11d for 2009 was the full position at the year end.

 

Thanks


Sam

 

 

Customer: replied 3 years ago.

Thanks Sam

 

Real lesson learned for me in making sure i check with my employer and HMRC every time i get a change of coding notice. I will certainly do what you have suggested.

 

My March salary slip shows a tax code of M1 K261, is it the case that K being negative do they effectivly tax me on money i don't even earn so effectivly add £2610 etc on to my salary and tax me at 40% on that amount as well as then the usual 20% on my earnings up to £37,400 then 40% on amount over that ?

 

As i had an annual bonus in March i have seen my total deductions amount to something ridiculous like 55% of my taxable income, could this be right given my tax code ?

 

 

 

 

Expert:  Sam replied 3 years ago.

Hi

 

Thanks for your response

 

Yes K code means that the deductions needed to be made from your personal allowances (in your case company car and beneficial loan) are in excess of the allowances awarded, so you have negative allowances.

 

So each month when you are paid 1/12th of these negative allowances (so 2610/12 = £217.50 )are added to your salary and you are then taxed accordingly.

 

So the first £3116 is at 20% and anything over and above is at 40%

 

Depending on the size of your annual bonus and what gross income it was added to - could have seen 40% tax certainly taken (as you were already 40% tax payer without the bonus and the bonus was paid in the last month of the tax year)

 

And if this took you over the £150,000 limit for 2010/2011 then this could have taken you into 50% tax band and there would have to be a review on your actual personal allowances, as any gross income in excess of £100,000 starts to see a loss of personal allowances. (£1 loss of allowance for every £2 the income is over the 100K threshold by)

 

But the 50% tax rate and the £100K limit only started from 06/04/2010 so would apply to this tax year

 

So yes, your deductions just on that month (if this tax year) might have seen you breaching 55% - but its the overall position that needs to be looked at for the whole year.

If you are again referring to 2009/10 then I would not expect you to pay any more than 40% tax as a deduction (although in real term deductions would have amounted to a higher figure due to the negative allowances and again due to it being a last month of the year payment)

 

Thanks


Sam

 

 

 

Customer: replied 3 years ago.

Thanks Sam

 

Is there any relatively cheap way of getting somebody to look at my tax codes, salary slips and P11ds etc over last few years and give me an accurate view of what i should have been paying ?

Expert:  Sam replied 3 years ago.

Hi

 

Thanks for your response

 

You may find a small accountant (one man band) that will do this for you fairly cheaply - you will need to ring around your area

 

Thanks

 

Sam

Customer: replied 3 years ago.

Thanks Sam

 

Should be final question for now, going back to your earlier answer about code changes. Unless my employer advises HMRC of changes should HMRC be revising my taxe code continually, my assumption would be they should only change it if notified of a change in my circumstances or when they act upon the P11D which of course is sometime after they have received it.

 

So i would only expect to see 2 code changes in a tax year, 1st one at start of tax year based on previous years p11D so for example my tax code for 2011-12 would be based on the P11D my employr sent them in July 2010 which was for tax year 2009-10. I will then get a revised code in say end of this year based on my P11D my employer sends them in July this year for tax year 2010-11.

 

I hope this my question makes sense, apologies if not.

Expert:  Sam replied 3 years ago.

Hi

 

Thanks for your response

 

HMRC will only ever review your code when they become aware of a change and the annual review to issue the following years tax code (usually issued Jan/Feb each year) but as you have had beenfits from the company for some time, the P11d would have provoked a review and issue of the code, and each time you record is accessed the system expects a code check and some HMRC staff fail to check the NO box to prevent the issue.

 

So for 2011/2012 you would be issued with a new code Jan/Feb 2011 and then again should the P11d be reviewed between then and anytime up to 05/04/2012 from 2009/10

So yes, usually one would expect two changes as things stand. Sometimes if the P11d has been worked before Jan/Feb 2011 then just one tax code will be issued in advance ready for the tax year.

 

Thanks


Sam

 

 

 

Sam, Accountant
Category: UK Tax
Satisfied Customers: 12823
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
Sam and 2 other UK Tax Specialists are ready to help you
Customer: replied 3 years ago.

Thanks Sam

 

By the way i really like this service, i was a bit hesitant about paying the fee but well worth it.

 

So the only way for me to know for certain why i have had multiple code changes in the last few years as is you suggest contacting my employer payroll team and asking for a breakdown of what they have sent to HMRC for that period and then check that with HMRC.

 

Seems realy odd why i have had so many code changes.

Expert:  Sam replied 3 years ago.

HI

 

I am glad you are happy with Just Answer

 

And/Or you can contact HMRC and ask what led to each code change, although there should have been reasons given on the P2 notice of codins (see the back of each P2)

 

Thanks

 

Sam

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