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Sam, Accountant
Category: UK Tax
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My wife joined a company in November 2009 and gave them her

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My wife joined a company in November 2009 and gave them her P45 twice which they lost. They did not provide her a P46 form to sign. They immediately put her on a BT code which led to underpayments as she was a high earner. HMRC has notified her underpayments of £3982.8 for 2009-2010, £10,003 for 2010-2011 and £19,246 for 2011-12. During this time, HMRC would have received annual P14s from the employer. Not once did she receive a new Notice of Coding in the 2 1/2 year period. Total tax bill now around £33K. Is this employer error or HMRC error or both ? Thanks.



Thanks for your question


This is employer error, as

1) They failed to use the tax code offered to them (it could not have been officially given twice, as there is only one Part 3 to the P45 and this is the only part an employer can take information from)

2) They then failed to ask your wife to complete a P46, which would have allowed them to send this into HMRC, for a correct tax code to be issued, thereby preventing the continuing use of BR, which would not take the tax rate bands into account, and merely charge all income at 20%


There is no HMRC error, that would stand up on appeal, because although HMRC did fail to issue tax codes following the receipt of the P35 Annual Year return and the copy of your wife's P60 (P14) they do not work cases from the year end returns on the back of those errors, but instead your wifes' case would have been listed for review, on which those lists are never fully worked. So although clearly HMRC failed to make use of the information provided, HMRC error can only be considered, where the taxpayer themselves has contacted HMRC, and HMRC then fail to act on that.


Also HMRC will argue that your wife never contacted them, as one would have expected her to question the use of the BR tax code, and ask why tax free allowances had not been awarded, which only HMRC could have rectified. So HMRC are as much to blame as you wife (in their eyes!!)


You have taken the right course of action appealing on employer error, and there is sufficient evidence that the employer DID NOT

1) Act in good faith

2) Operate PAYE correctly


And I would expect some of the tax (if not all) to be collected from the employer.


If you need any further help with this, once a response has been received from HMRC, then do feel free to come back to Just Answer, and you can always ask for me Sam Tax, in your opening sentence.

If, in the meantime, I could trouble you to rate the level of service I have provided, it would be very much appreciated, as this ensures I am paid.


Good luck.









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Customer: replied 4 years ago.

Hi Sam,

That confirms we are on the right track.


When I wrote P45 had been supplied twice, I meant to say that copy P45 was sent in advance by post and original handed in on first day in person.


We will now appeal to HMRC on Employer Error.


Also, we are still considering Court Action against former employer to reclaim tax, interest and compensation for stress/hardship caused by this matter.


Thank you for your help.

Customer: replied 4 years ago.

Hi Sam,


Going back to the matter of supplying the employer with the P45.


A copy of this was sent via post to the employer together with other information requested a few weeks prior to her start date - a copy was kept annotated with the date sent.


On the first day of employment, the original was handed to her boss - a colour copy was made and annotated with the date handed over.


In terms of HMRC, what level does one need to prove that the P45 was handed over ?


Surely it would be unreasonable to expect a new employee to send a P45 by Recorded Delivery or ask for a signature receipt on handing it over on the first day - surely that does not show "mutual trust" when commencing an employment relationship ?


What level of proof do you think HMRC expect - would the way my wife managed it be acceptable in your experience ?






Thanks for your further question


AS annotated copies were kept, on both occasions, this will be considered should the employer deny having received the P45 (And you are right it not unreasonable to expect an employee to use such a method for the purpose of creating a firmer paper trail) but as the original copy was actually handed to her boss on the first day of taking up employment HMRC should accept this without further need for evidence.


More importantly, of the employer denies having received the P45, they clearly did not then offer a P46 for completion, so either way they have failed to operate PAYE correctly, and this is all that is needed to argue employer error, successfully.


But certainly the way in which your wife has handled it, offers no doubt that she followed the requirements to try and ensure that the tax she paid was accurate (and in fact she has undertaken two actions which is more than HMRC would expect to see)


In my experience, HMRC will accept this as employer error, and if they fail to do so, then do not hesitate to ask for another officer to review the case (along with a formal compliant as to how HMRC have handles this case) and I would even encourage such a case to be taken to tribunal if that was the required (but I feel sure it will not to get that far)

And unless the P45 was out of date, incorrect, or incomplete, then its a clear case of their mistake led to this unpaid position.


If in the meantime your wife can get the employer to respond (in writing) why they failed to use the P45 offered to them, this would further make any further response needed to HMRC, should they initially refuse the appeal easier to settle (and I am only suggesting this to cover ALL bases)