employers failure to issue P46

[wootton2724]

Hi

Back in September 2008 my 72 year old father was offered a job delivering prescriptions for the local pharmacy (part of a chain) on a part time basis. He accepted the job in order to suppliment his income and help support my mother. He formally accepted the position in writing, informing his new employer that he was in receipt of a small private pension and that this would be his second source of income. This was also reiterated in a conversation with the HR department.

It has now become apparent that since he commenced work in 2008 his employer has been deducting tax using the incorrect tax code, resulting in underpayment of approximately £6000. Which HMRC are seeking to recover from my father.

The employer was notified both in writing and verbally on the second day of employment that this was my father's second source of income and that as he had been retired for several years no P45 was available. As I now understand it, if no P45 is available to the employer, the employer has a legal responsibility to issue a P46 in order to ascertain the correct informatio,n in order for the HMRC to issue the correct tax code. Despite being aware that this employment was my fathers second source of income and that he did not have a P45, at no point did the employer ask my father to complete a P46. As a result they have not been taxing him using the correct tax code.

As a direct result of the employer not following HMRC regulations or its failure to act on the information given by my father, my father is now being asked to pay the underpayment of tax, approximately £6000. HMRC are aware of the situation and have writen to the employer several times since April 2011 however as of todays date they have not responded.

Both my mother and father are now extremely anxious over the possibility of having to pay HMRC £6000 in unpaid tax, which has occurred through no fault of their own. As far as my father is concerned he had notified his new employer of his financial situation and having been out of the work place for several years believed that he had fulfilled his duty to notify them, that this was to be his second source of income.

My parents joint savings amount to approximately £2000. They simply cannot afford to repay the underpayment. Prior to this my father had decided that at 76 he should retire. However in light of the above he will have to work for another year, without receiving any numeration simply to pay the underpayment.

I feel that this is unjust as the employer is clearly at fault for not acting on the information available to them. They were aware that my father did not have a P45 and failed to issue him with or ask him to complete a P46. Can anyone advise me on what course of redress we may have with the employer? Could my father take them to an employment tribunal or seek compensation through the courts?

Any advice would be greatly appreciated. Both my mother and father should now be enjoying their 'autumn years' and not stressing about how they are going to find the money to meet this demand, especially as they thought they had complied with requirements. The company failed in its obligations to issue my father with a P46 and its failure to act on the information given by my father.

[mullet]

This is one side of the story. And - on the basis of the information provided - the employer does indeed appear to have failed. But there are some gaps. How did this underpayment come to light? Through HMRC's annual "reconciliation" where they check pay & tax, or through the employer being investigated? (And I realise that you would not necessarily know about the latter.) Whilst there has been an employer failure, what about the employee? Was your father receiving the benefit of a "full" tax code from his pension provider and his employer? If so, did he do anything about it? Did he inform HMRC? Please advise the tax code used by each source. How many years did this go on for?

HMRC will usually pursue the employer for the tax and any NICs where there has been an employer failure. And whether the employer then pursues the employee for the underpaid tax is between them and HMRC will not get involved. HMRC will only directly pursue the employee where the employer has acted in good faith. A fairly common situation is where a person starts a new (typically part-time) job and does not have a P45. They wave a coding notice (from another job or pension) in front of the employer saying "this is my tax code", which the employer then uses.

Could your father have a potential case to pursue through the courts? It is difficult to say without the full facts. If I was in your position I would firstly be wondering why HMRC is pursuing the employee directly.

[robbob]

Hello wootton2724

What tax code was used by this employer when your father first commenced employment with this firm?

[wootton2724]

Many thanks to you both for your prompt response. The information that I have here only dates back to 2010 so I will have to check my fathers records over the weekend. However from the information I have available to me at present, it would appear that my father received notification from HMRC on 2 February 2010 advising him that the pharmacy should use code BR for the tax year 2010/11 and that HMRC had also notified them, the employer of this.

My father also informed the payrol department of this by phone. However it was never implemented and this was highlighted to HMRC and also the employer on several occasions. In March 2011 once again my father wrote to HMRC informing them that the code was still not being implemented. However despite the Revenue writing to my father on in February 2010 informing him that tax code BR should be used and the employer had been informed by them, on 14th April 2011 the Revenue wrote to my father informing him that they did not hold any record of his financial/tax affairs. Which is a complete contradiction as a year earlier they issued both him and his employer with a notice stating that Tax code BR should be used also stating that; 'they had worked out the tax code for his other employment(s) or pension(s).' Therefore clearly they were aware of my fathers financial situation at this point and aware of what Tax codes should have been implemented not only for his employment but for his pension as well. As a result they would have been aware of the under collection/payments made.

We clearly have evidence that HMRC informed the employer at this point of what tax code to use. However the employer has failed to act on the information received by HMRC.

I hope this helps. I will gain the earlier information when I see my father over the weekend.

Once again, many thanks for your assistance.

[robbob]

Hello wooton

Was your father aware from the outset that the code being used by his employer was not the same as per his coding notice? did he check his payslips and/or his year end P60.
Reading between the lines (i may be wrong here) this sounds more like a situation where your father knew the code was used incorrect and was trying to remedy this.

If this is the case then HMRC would probably argue that as your father was aware the wrong code was being used then he should not have spent any extra salary he received due to the wrong code being implemented.Remember you father has had the money HMRC are requesting in his pocket and it appears this has been spent.

Obviously there may very well be a period between starting and when he started to take action (Feb 10) where he might not have ahead a reasonable expectation that there was anything wrong with the code.
The fact that HMRC have BR issued a code means they are unlikely to w/off the debt from after this date - although whether they should be chasing you or the employer first of all is probably a question that needs to be answered.