Please help DH just been handed £19k tax bill due to ex employer error

[makedoandmend]

i think it dates back to dh buying or cashing in some shares from his old company when they went public. He did a tax return for that year (this was years ago) and told the tax office this was a one off. However, they kept sending him forms which he (like an idiot) ignored - thinking that because he'd told them it was a one off, he didn't have to do anything. I've finally got him to sort it all out but they say that his ex employer (who he worked for for 10 years but left about four years ago) put him in the wrong tax bracket and he owes £19,000. We don't know what to do - we're only just getting back on our feet from dh's redundancy a couple of weeks before dd was born seven months ago.

Does anyone have any ideas what we can/should do next? We're a bit like rabbits stuck in headlights tonight. I'm going to ring the citizen's advice tomorrow (although the last time we rang them about dh's redundancy they said they would only give a service to people qualifying for legal aid - which I don'think we would).

I'm just floored by this.

Sorry i may disappear as dd was up last night and I'm a bit knackered. I'd be so grateful for any advice.

Sorry to hear but the In Revenue often come to arrangement to defer payment over a longer period. Could phone them up to discuss. Explain hardship as they are having to be more lenient on timescales at present.

Thanks TDiddy - I think DH is going to phone them tomorrow (slightly worried as he can be such a push over - he just likes to please everyone and ends up agreeing to things he can't possibly do ).

They would be happy to speak to you if he hands the phone over. You must plead severe hardship.

do you have any tax allowances to use e.g. CGT alloowance

Or any brought forward capital gains tax losses (on shares)? Or was it income that is being taxed?

It was the tax on his income - he was PAYE and only filled out the return once because of the shares thing. He sold his shares at the time and he's been PAYE since (does this make sense - sorry I'm the biggest dunce when it comes to finances of any kind - my brain just clouds over) - which is why he ignored the tax returns coming to him - as he thought he didn't need to do anything with them.

Sorry if that doesn't make sense - I'm horribly over-tired. Time for bed I think. Thanks for the help so far

Get them to break down the figures for you. If he was PAYE, I doubt that his employer made a mistake on his tax band. They can also only go back 6 years I think on this.

Find his P60s (end of year annual statement provided by employer) for the years the claim relates to, and using the HMRC website, work out the tax for each year.

You take his gross income (less any pension contributions from salary) and then take off the personal allowance for the year in question. Next you slice the income into bands i.e: so much at 10%, so much at 22% and so much at 40% (checking these rates are correct for those years) and calculate the tax due. Compare this with what was paid on the P60 and you can see if anything was owed for PAYE. I would imagine that this has come from the shares, and that you can use CGT allowances to mop up some of the tax due.

It is worth ringing HMRC and asking someone to explain it to you; or go into one of the tax offices and have someone explain what is going on. If you ring, ask to be put through to an actual tax officer, not whoever answers the phones, as they are not trained in the legislation and frequently give incorrect and misleading information.

Thanks scaryteacher - I've just emailed dh with your advice. We think that the confusion must be to do with the shares. He's only had shares once and declared the sale of them - but has never held any since. God I hope we can sort it out - otherwise it'll take a very long time to pay off and we've only just taken out a loan to clear credit cards

agree that he needs to speak to HMRC for a breakdown.

But, harsh as this sounds, his employer is not at fault here - he is. If he had filled in the tax returns then his tax code would have been adjusted accordingly the first year. Failing to fill in a tax return is an offence and carries a penalty afaik, so part of that 19 grand could well be fines.

I've been in a similar situation. My employer at the time had used the wrong tax code for me as they hadn't taken into account the Benefits-in-kind bit of the company car I had. It didn't help that the inland revenue were sending self-assessment forms to an address I hadn't lived in for a decade...

I discovered that the inland revenue can waive unpaid tax charges if they (the IR) made a mistake. In my case, I argued that as my employer was sending the IR my salary details (as part of the PAYE data employers need to send the IR), then the fact that the IR took seven years to notice that the tax code was wrong was hardly my fault and was, in fact, an IR mistake. It took several visits to the local tax office plus a series of long phone calls to the tax inspector to do it, but I eventually got them to waive 90% of the bill. I think there are several other criteria for waiving bills.

The information I used to justify this was in an IR staff manual that was on their website. The IR published the manuals that they used for staff training, and I found it in there (in a section about correcting mistakes, if I recall correctly). Now they're HMRC I can't just give you a link to the appropriate one as their website's completely different, but I'd suggest you start here. It's well worth having a look to see if you can find similar HMRC manuals as being able to quote their own chapter and verse back at them helped a lot.

wannaBe - I understand that - but he did tell the tax office that it was a one off at the time. I agree he was an idiot for ignoring the subsequent forms sent out but I think he thought as he'd never done it before (he's always been PAYE) he could just ignore them. Because I've been self employed before, I realised the significance of what was happening when I found out (the tax office often need telling again and again not to send returns - after I ceased to be self employed and told them they sent me returns for another three years which, of course, I had to fill in and return despite being PAYE).

Incidently it was someone at the tax office that said his employer had put him in the wrong tax band.

If we have to pay then so be it - I guess it's a lesson learned for him - but I just don't see how we can afford it - we're struggling horribly month to month as it is. I'm just worried it'll mean we have to forget having another child (we've got a 7mo) - I'm 41 so we have to make the decision soon. However, no point worrying until it happens

Thanks for your advice

Thanks Snorbs - I'll email dh with the info. That's given me a bit of hope! I've actually always found the tax office quite helpful once you get to someone who knows what they're talking about - but it's just getting to that person can be tricky

If you are self-employed then I assume you do your own tax return so can work out exactly where the money went?

It's confusing - either he was on the wrong tax code or he wasn't, but either way he should have realised. Or he didn't pay tax on the shares, but again, he must have known this?

Do you have a friend who is an accountant who could go through it all with you both?

morningpaper - I was self employed - dh has never been so. I don't think he checked his tax band (I have to admit I never have when I've been PAYE - you're probably supposed to but I just trust the employer - maybe I shouldn't)

He payed tax on his shares - but they kept sending out returns when he didn't have any shares and I think he ignored the returns thinking he didn't have to do anything.

He's just contacted me to say his boss has a friendly accountant who is going to help us sort it out.

It was only bloody £2k worth of shares anyway - not enough of a fortune to make all this worthwhile!

well 2k shouldn't make any difference then really

it seems odd that he could have been in the wrong tax band

I agree that you need to check all his P60s - you should be able to do it in a spreadsheet - against his actual earnings

what a bugger

Couldn't have put it better myself morningpaper

I know money's tight, but I think an accountant may be the way forward here. Given the sum involved, s/he'll probably be able to reduce the bill by more than his/her fees, making it a net cash benefit, iyswim.

Arggh this happened to me too - but four years afterwards, and I'd just been made redundant. I spoke to the HMRC and they let me pay it back over a couple of years and didn't charge me interest. However it's worth saying it's entirely up to you to check that both your employer and yourself if you submit a P35 do it right.

And just so you know, if you end up in a situation like this you seem to get flagged for audit on a regular basis

Unfortunately alot of people will be surprised to learn that their employer hasn't deducted sufficient tax from exgratia redundancy payments.

This whole thing has now sent me scuttling off to look at my payslips to check my tax band - especially as I guess it'll change going back part time - I just tend to ignore payslips (open it hoping for a surprise - get depressed - look at the gross figure - get depressed - compare it to the net figure - get depressed - stick it in a drawer) - not having to do tax calculations is one of the things I like about being PAYE - I used to hate the whole kerfuffle when I was self employed.

You just don't expect it to catch up with you seven years later or however long it is.