PAYE - Who's responsibility is the tax code?

[skeetly]

You are legally liable for the tax you owe.
The employer is just an unpaid collector of that tax.
It's not always apparent what code you should apply because (as an employer) you wouldn't have access to an employees tax history (for example: from previous employment).
Employees get a bit shirty if you apply the good old emergency tax code which is what the hmrc say you should do if you're not sure.
The HMRC are supposed to review it at the end of the financial year and hand out the correct code.

[skeetly]

This might be of interest as well:

http://www.bbc.co.uk/news/uk-15363168

[Sir Trev]

Originally Posted by skeetly

You are legally liable for the tax you owe.
The employer is just an unpaid collector of that tax.

This.

Always check your notice of coding change letters when they drop through the door and get back to HMRC if they seem odd. Your employer reports earning and benefits via their submissions and HMRC make the calculations, sending out coding change notes (to you and your employer) if codes change.

For car allowance/fuel card holders you will pay tax in arrears for the fuel element. The car allowance is simply income and is taxed at the time but fuel use is based on actual amount used and the tax is collected the following year from info supplied on your annual P11d*. The fuel benefit should be reduced by the business miles you do but your employer could of course get that wrong.

*P11d files go to HMRC at about the same time as they get printed and sent to employees.


Edited to say P11d, not P60. P11d is statement of benefits, P60 is statement of total earnings. Should have remembered that difference...

Originally Posted by Sir Trev

This.

Always check your notice of coding change letters when they drop through the door and get back to HMRC if they seem odd. Your employer reports earning and benefits via their submissions and HMRC make the calculations, sending out coding change notes (to you and your employer) if codes change.

For car allowance/fuel card holders you will pay tax in arrears for the fuel element. The car allowance is simply income and is taxed at the time but fuel use is based on actual amount used and the tax is collected the following year from info supplied on your annual P60*. The fuel benefit should be reduced by the business miles you do but your employer could of course get that wrong.

*P60 files go to HMRC at about the same time as they get printed and sent to employees.

I also have a fixed £60 per month deduction taken from my salary for personal mileage. It is shown as such on my payslips. Should this get deducted from my taxable amount as well?

I would imagine if it is for personal mileage the answer is no. Is this deducted before or after tax. Me thinks a lengthy discussion with your company accounts is in order establishing exactly what and why things are being done as at present.

[Sir Trev]

Originally Posted by Dicky Ticker

I would imagine if it is for personal mileage the answer is no. Is this deducted before or after tax. Me thinks a lengthy discussion with your company accounts is in order establishing exactly what and why things are being done as at present.

Possibly going to disagree with you here Dicky. If the deduction is for personal miles you are being given the benefit (the fuel card) but paying up front for the benefit (your salary deduction). I used to have a company car and a salary deduction helped offset the car benefit, but I'm a bit out of date as to whether this needs to be part of an agreed scheme with HMRC. Dicky is quite right about care being needed re: the before or after tax issue, but your company payroll software should be smart enough to work that out.

Ralph - have a chat with payroll. Take your last P11d in with you and ask them to explain how the deduction from salary reduces your tax liability. If they cannot explain it THAT is the time to worry.

OK, got all my payslips out and done a bit more reading and figured out what they have done. For the first 18 months of my employment, my company has been using a BR tax code, and taxing my entire salary and bonus payments at 22%. I'm pretty positive I filled out a P46 when I joined. That spilled over into 2009/10 by a few months. On that basis the tax bill seems a lot smaller than it should be, but I'm not going to moan about that. Now I understand how the codes work, it looks like they've been collecting it back over 2010/11 and 2011/12 anyway.

Also the value of the private mileage they put on my P11D's looks OK, it pretty much ties up with what I think I've spent, less the value of my monthly contributions. Still annoying that I've had the fuel card for three years, and I've never yet paid any tax on it!

Any thoughts?

[Sir Trev]

It is a common problem. Sounds like you've been on an "emergency" code - assumes no previous earnings in the tax period, no taxable benefits, and as you said applies a simple basic rate tax to your earnings. This should only ever be used temporarily as it just stores up trouble if you have complexity or if you are a higher rate tax payer. That said the Revenue are not clairvoyant and can only tax you for things like private fuel and health care in the following year (assuming they are correctly stated on your P11d). Some benefits can however be announced and taxed in year. Your payroll bods should be on the ball enough on your behalf to chase for an updated notice of coding, especially if you completed a P46 and especially as this has now crossed a tax year end. Having part defended the dreaded Revenue I will point out the obvious - they are never up to date on their paperwork and are well known for making a complete Horlicks of things.

Glad to hear your P11d seems to be about right (and I hope your P60). Do you get a self assessment form? If not you can probably request them for the last three years. PITA to fill out but they will highlight any under/over recovery of tax. If you suspect you're being done over then you should have a consultation with a tax advisor who will know a lot more than me.

Simple advice to anyone with any kind of benefit received over and above simple taxed income is CHECK YOUR CODING notes from HMRC. Find your P60 and P11d, add up your income and taxable benefits on one side, your deductions and allowances* on the other. The difference is your TAXABLE INCOME. This is the figure on which you pay tax**. If your coding note does not look right make a fuss or it could just store up trouble.

*allowances can be checked on the HMRC website - they change annually via the Budget. For example personal allowance - the first £x on which you pay no tax.

**I have simplified this a lot but this is essentially how it works. Self assessment forms are a very long winded way of doing the same thing.

Good luck.

[Stuuk1]

I though that it was your own responsibility.

The company deals with it, yes but that doesn't mean they get it correct.

My sister was hit by the tax man a few years ago, her boss was paying her tax in to his account so her payslip looked right. He did a runner and she was left to foot the bill.

Having said this, I don't check mine...


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[Luckypants]

Originally Posted by Stuuk1

My sister was hit by the tax man a few years ago, her boss was paying her tax in to his account so her payslip looked right. He did a runner and she was left to foot the bill.

I believe your sister was wrongly charged and she should have challenged it (she may still be able to if it is recent) as that is a case of fraud. The revenue rules are quite clear on this, the director will be charged for the non-payment of deductions.