P11D mistake - HMRC error - will I go to hell if I don't tell?

[ChillyBilly]

[this assumes a fair bit of knowledge re P11Ds]

HMRC have incorrectly processed some of our company P11D submissions for 09/10.

They have only taken the information on the cover sheet and assumed that covers the entire period for which a car was given. For someone like me (who changed my car about 6 times that year and thus whose information went on to 2 continuation sheets), they have now reissued a tax code and given a rebate for what the period that (they consider) I did not have a car.

I fully expect it to catch up with me at some point, but is there actually any problem with me treating the 'soft' tax code as tantamount as an unofficial loan?! My information was submitted in full and on time; they have made the error.

If they spot it within a few months, they will increase my code for 2011. But I'm skint NOW and it's actually pretty helpful to have the tax bill reduced a bit whilst we're covering so many other outgoings. In a year or so, we'll be in a better position and, if they spot their error, I fully expect to have to pay it back. I'm not evading it at all; just not calling them up to tell them they have made a mistake.

My colleague thinks I am SHOCKING to consider this

Having had experience of changing cars mid-year, incorrect tax codes and knowing how long the whole pantomime dragged on for afterwards I'd say own up and take the pain. I'm not one normally for fessing up to HMRC if they don't ask, but having ended up forking out a cheque for over £1000 (and it wasn't even my fault) it was a lot nastier than paying a few extra quid each month. Make savings elsewhere because HMRC are a bitch of a savings bank...

ooooooooooh ... that is not so fluffy ...

I presume you are referring to your 2010/11 tax code.

PAYE codes are just a way of estimating tax to be deducted during the year. For most people with relatively simple tax affairs the tax deducted works out to what was actually due so no issue.

In your case the code uses the figures from your 2009/10 P11D to estimate what benefits you will have in 2010/11 (assuming they will remain the same but in your case they have got it wrong). Then after the end of this tax year your P11D for 2010/11 will be filed which will have your actual benefits for 2010/11.

If you file a tax return then the underpayment will become due 31 January 2012, if you don't then HMRC will probably code the underpayment into the next years tax code depending on how much it is for. If you do have it coded then you'll end up paying for that years benefits plus the underpayment so you're net pay will be alot less than you're used to. If you are happy with this then I would leave things as they are, but if you don't like any nasty suprises in the future then better to get the tax code changed.

Thanks, Morph.

I'm not sure we are talking on the same lines, exactly ... they have only just updated my tax code (having applied the same T code for over 12 months) with the information submitted in July 2010 (pertaining to 2009/10).

But what you say is entirely true. I am just rather tempted to take it whilst I can. We are struggling for cash flow this year, but will be better next year.

It does leave me feeling uneasy.

Do you mean that they are actually giving you a rebate for 09/10? Or is it just that they are assuming you haven't had a car in 10/11?

In the first situation (a refund for "overpaid" tax in 09/10) I would notify them. As the recent fuss over HMRC errors shows you are expected to know whether they are deducting the correct amount of tax and therefore they will want any underpayment to be repaid.

If they're just estimating your 10/11 liability and haven't included the car then there's no need to notify HMRC since, as Morph says, this will be sorted when you do your tax return or when the new P11d goes in. You just have to be sure you've got the money there next year to cover the increased liability.

Thanks.

It's both, really. They've changed my tax code, which resulted in the application of a rebate in January's salary. No separate payment was issued, however.

Does the tax code actually say that it's the overcharged tax in 09/10 that is being adjusted? Or is it just a refund because they've now decided that as you didn't have a car in 10/11, even though you were taxed as if you had, then they'll give you the overtaxed amount back i.e. the tax they've "erroneously" collected from Apr'10?

The reason I'm asking is that I've never actually seen a previous tax year's overpayment (which is what HMRC thinks has happened) being refunded through a tax code. In my experience they usually send you a cheque if the refund is due for a previous tax year. Doesn't mean it can't happen, I suppose. I just suggest you check which period's tax was actually refunded through your salary.

DH had an error on his P11D a few years ago now. Basically when his company got taken over part of the compulsory health insurance wasn't added onto the P11D and it took 2.5 years for them to catch the error.

In the end the HMRC decided to take the money back over a period of about 18 months, IIRC it was the last 6 months of the tax year when they realised and all of the following tax year.

I think the total amount owing was less than £1000 though and the mistake was down to the company payroll (no way he could have known), not DH so maybe that's why they were nice and allowed longer to pay back.

at unofficial loan

They'll catch up with you and put you into self assesment hell forever if you don't fess up.

DH had an error to do with company car he had for 3 months 5 years ago and despite being PAYE for his entire career he's still doing self assesments now.

Don't mess about with the HMRC.

Chillybilly> It has probably taken HMRC till now to process the P11D (that was submitted in July 2010) so thats why you just got the new code. Also HMRC had a new PAYE computer system last year and have had major teething problems

Riksti> I assumed that the PAYE code included the reduced benefits hence resulting in a tax repayment when applied to latest salary. An overpayment from a prior year wouldn't be included in PAYE code

It is your responsibility to check your PAYE code and inform them if it is incorrect. It is also your responsibility to pay the tax you are meant too.

Do you complete a SATR or are you PAYE?

If you complete a SATR it will all get sorted out in your balancing payment for the year and you should be used to putting money aside to pay the tax bill.

If you are PAYE personally I would want to code to be correct as I'd rather pay the tax each month then get hit for a big deduction the following year when you will pay the underpayment PLUS the tax you should have been paying this year (ie double). You may also trigger them into issuing you with a SATR which I would suggest you want to avoid if at all possible!

If the tax has already been paid up to now and the new code has resulted in an overpayment simply get it corrected now. It's unlikely they will take all the tax repaid in error back in one hit anyhow. Especially being this close to April. It's about now they start saying it's too late to amend the 2009/10 codes anyhow so they may not action it anyhow.

Also you say you are likely to have more income next year. Are you sure about that? IME underpaid tax codes tend to get allocated a couple of years on. So it's likely the underpayment may come off your 2011/12 code not your 2010/11. So you'll have this hanging over you for a couple of years potentially. What if things aren't quite so good that year? Or worse still you lose your job but still have a big tax bill hanging over you....