employer miscalculated tax, now I've had a massive tax bill

[cerealqueen]

My former employer miscalculated my tax about four years ago and now I have had a bill for £6,000. They admit they made an error (something to do with their computer systems), but state that my personal tax liability is my problem.

I am bit calmer than I was earlier today but am still shaking with the shock of it. I am not currently working, SAHM with two under 5.

Please, any advice?

Call HMRC and explain the situation. They should be able to agree to a payment plan with you.

Who sent you the bill? Your former employer or HMRC?

HMRC sent me a bill out of the blue. I just can't believe they could make a mistake like this. It is such large amount of money.

The HMRC bill will most likely have been sent by a computer automatically that will not know your current circumstances. You need to speak to a person at HMRC and explain what has happened. You can ask for a payment plan in cases like this.

If you have your paperwork/records for the period I would double check the figures as it is not unknown for HMRC to make errors. If they have simply sent you a demand with no calculation or explanation included, write to them and ask them to supply a calculation for the sum demanded.

It is correct, my former employer has said that their calculations match what the HMRC have provided.
I suppose I'm just shocked that my employer can make such a huge cock up and say, yeas, we made a mistake, you've got to pay, we wash our hands of it. A warning to others I suppose, never assume anything is right, even on PAYE.
I will phone tax office on Monday.

It's for similar reasons why, several years ago, I opted to start submitting self-assessments. That way I know that, at least once a year, I'm all square with HMRC.

BTW.... We're all personally responsible for paying the right amount of tax but you can appeal to HMRC that, as a layman (rather than a finance professional), you could not have reasonably expected your taxes to have been calculated incorrectly by your employer.

Cogito is right unfortunately. You are responsible for ensuring that you pay the correct tax. In sitautions similiar to yours I have seen HMRC respond to appeals by stating that the taxpayer could reasonably have known that they were underpaying tax via PAYE. They will argue that £30k (as that is probably effectively what it is) of untaxed income is noticable.

How long was the error unnoticed for? You may have a reasonable appeal/argument if some of it was from over 6 years ago or if the error has changed jobs with you iyswim?

You need to get proper advice - PAYE calculations are the responsibility of the employer, and unless you knew or should have known at the time that they were incorrect (and perhaps even if you did) you should have no liability. Tax Aid is probably your first port of call, if they cannot help you you need an accountant experienced in dealing with PAYE Direction Notices and appeals.

Oh, I assume this is a letter from HMRC, not from the employer or their representative trying to reclaim money from you because they have had to pay it to HMRC?

"You are responsible for ensuring that you pay the correct tax."

This is only true under Self Assessment. Under the PAYE regulations, an employer is responsible for ensuring that the correct deductions are made and paid to HMRC.

I have no idea if any of these are any use to you but they might be worth a read:

PAYE tax error: Workers urged to use loophole to avoid HMRC tax repayment demands

scroll to 'Error or delay' section

"In sitautions similiar to yours I have seen HMRC respond to appeals by stating that the taxpayer could reasonably have known that they were underpaying tax via PAYE."

That would only be relevant in the context of PAYE Regulation 72(4), otherwise known as Condition B which essentially deals with the situation where the employer and employee conspire to underpay tax. If this were not the case, such a response from HMRC should be escalated further.

Can I ask who handled the 'situations similar to yours' on behalf of the taxpayer MissKeithLemon?

The error should have shown up on your P45 P60 but more importantly on your employer's Annual Return to HMRC. If the Return was submitted with errors that is the responsibility of the employer.

Thank you for the additional responses. Very helpful though a bit contradictory. I just found this thanks to oddboots :

www.hmrc.gov.uk/manuals/pommanual/paye95011.htm

Which says that if the mistake was made by my employer then they are liable? I am reading that right aren't I?

My employer have been quite clear that even though they made an error, it is still down to me.

Very helpful though a bit contradictory.

That's the internet for you

Yes you are reading that right, although that section of the manual (ESC A19) actually deals with HMRC errors (the page you have found says that an employer error is not an HMRC error).

The relevant part of the manual for employer errors is here, although it is a bit technical and the bit that would be really useful (SPD 60) is confidential.

But please can you confirm if this letter is from HMRC or from your employer? If it is from your employer then HMRC will have done everything correctly and got the money from your employer who is now chasing you. In most cases your employer is entitled to do this, although they have to take you to court to establish that you have to pay anything back and courts tend to be very unsympathetic to incompetant employers.

Hello again, MrAnchovy, the letter was from HMRC.

I have not called HMRC yet, want to be a bit more keyed up on this first!

So, HMRC could chase employer for the sum who could, theoretically take me to court? I say let them!

My mum has been in this situation. She read everything about it and argued it. Said it was her employers mistake and told the tax office to chase them. She owed them 3k and they've agreed to drop it. She told them she was now a pensioner and couldn't afford today them anything.

Did your employer use the incorrect code? In which case it will be argued that you're sent a coding notice by HMRC before the tax year and upon any changes and it's your responsibility to ensure that the code your employer uses (It will be on your pay slip/advice notice and P45 at end of year) is the correct one. Is the error only for one tax year? That's a whacking load of tax in one year, and it will be assumed you would have noticed £500 tax a month not being paid. Unless the employer actually calculated wrongly whilst using the correct code then you will be liable for it, but a payment plan will be acceptable to HMRC.

Sorry, it was a redundancy payment, should have made that clearer. Does it make a difference to any advice on here?

The computer system my employer had only calculated the base rate payable, not the higher rate.

So I guess I am still liable.

What if I agree a payment plan and want to go back to work part time? Was thinking of finding part time work over xmas at weekends, any money I earn will go to the tax man? Just plain worried now. That amount of debt scares me.

If you keep up a repayment plan and communicate the HMRC will be understanding. You just won't be allowed to take the piss, ie earn 50k and plead you can only repay £5 a month.

A certain amount of redundancy payment should be tax free.

Redundancy payments are tax free up to £30000, lots of info on HMRC website, so worth studying that in detail so you know your ground before you speak to HMRC, still looks like an employer's error however.

Does it make a difference to any advice on here?

Yes it could make a big difference, particularly if it was paid after you left. You really need some specific personal advice on this, you are not going to get anything useful on an internet forum - even people who know what they are talking about need to see the original documentation to know where you stand. If you are not currently earning much, the charity Tax Aid is the place to start.

it's your responsibility to ensure that the code your employer uses (It will be on your pay slip/advice notice and P45 at end of year) is the correct one

It certainly isn't - where do you get that from?

The money was paid after I left, they would not pay it until it was clear I had not secured alternative employment (this was the NHS)
I was pregnant at time so unlikely to get another job.
I am not currently working as have two children under 5.

I will seek some advice - thank you everybody who has responded, much appreciated.