Too little tax paid = large liability = employer's fault?

Question

Hi,

I started a new job in 2006, and it appears my employer forgot to file my P45 or P46, as such I have remained on a BR (basic rate) tax code for the last 2.5 years (without realising it). As I earn well over the higher rate threshold, I thus have a substantial outstanding tax liability for c.40k - far more than I have in liquid assets. Is my employer responsible for this? Can I claim the tax back off them as it was their mistake? If not, how can I deal with HMRC as I don't have this cash available to repay immediately.

Thanks.

Answer 1

Unfortunately the onus on paying the right amount of tax is on the tax payer and therefore there is no responsibility on your employer.

My advice would be firstly to check that HMRC's calculations are correct.

Secondly check whether they are imposing any penalties for late payment or non disclosure - certainly i would challenge any penaties

Thirdly contact them to arrange a reasonable payment plan but remember that interest will continue to be added.

Its a nasty situation to be in but it won't go away and needs sorting asap.  If you'd like me to look into the calculations for you send me an e-mail

Answer 2

My answer is the same as the one you received on Moneysavingexpert.com. If you are earning the sort of salary which has given rise to a £40k liability even with BR tax deducted and you were not aware of it, then you are probably overpaid.

HMRC take the view that it is your responsibility to ensure that your tax deductions are correct by checking your code number. HMRC will not require payment in full if you can give them an income and expenditure statement that shows that you would incur hardship by doing so.