PAYE Error

[diso]

Hi All

My partners employer failed to operate PAYE correctly/made an error resulting in underpayment of personal tax. Initially HMRC chased my partner for the underpayment of tax but once the HMRC were made aware of the facts the HMRC agreed/have instructed the employer to pay the underpayment of tax. My partners employer is now chasing my partner for the money and is asking to deduct from their pay. Can the employer do this? Does my partner have any rights? Does my partner need to agree?

Any advice appreciated.

D:tinysmile_aha_t:

[teaboy2]

Re: PAYE Error

Was the correct amount before tax paid to your partner? In otherwords did the employer pay the correct hourly rate, but simply deducted the wrong amount of tax from your partners wages that lead to the underpayment?

IF so - And the employer paid the correct wage to your partner before tax and national insurance deductions, then even though it was the employers error that led to not enough deductions being taken from your partners wage for tax, it is still your partner that owes the tax not the employer. So in effect, as the employer has paid it, the employer is entitled to claim it as overpayment of wages. Because even though he paid your partner the correct overall wage and only failed to deduct the correct amount of tax the employer has now, in effect, paid your partner twice now for the sum of tax involved.

So basically yes they are entitled to reclaim the additional sum paid, even though it was their error. You are legally responsible for making sure your tax and NI is paid and is correct along with your wages - That's one of the reasons why your given a itemised payslip showing tax codes and deductions. So if the amount is not paid back, the employer can seek recourse through the courts for the sums involved after overpayment of wages (This will be treated as debt, end the employer could get a CCJ against your partner). Therefore it is best your partner agrees to a weekly or monthly deduction from wages, that is affordable to him/her over a period of weeks or months.

So you need to go through with your partner all her wage slips for the financial year to make sure she was paid the correct amount of wages prior to deductions.

[diso]

Re: PAYE Error

Hi teaboy2

Thanks for responding so quickly. The employer deducted my partners pension contribution before calculating tax i.e. their taxable pay was lower than it should of been resulting in less tax being paid!

Does the fact that HMRC is now chasing the employer for the underpayment support my partners case that they shouldn't be liable?

D

[CYNthesys]

Re: PAYE Error

I believe that it is the employer, not your daughter who is liable, ESC A 19 may apply
If you read this thread it may help
http://www.legalbeagles.info/forums/...-underpaid-tax

[teaboy2]

Re: PAYE Error

The employer made the error of working out tax after pension deduction. But overall wages was correct prior to any deductions at all? Am i correct?

If so, then your partner owes the employer as the employer has paid her tax for her, which would have otherwise been deducted from her pay, if it had not been for the employers original error. So basically your partner now owes the employer, what the employer should have initially deducted from his/her pay originally as tax. The employer has therefore, as things stand, paid your partners tax to your partner, instead of HMRC originally, but has now also paid that tax to HMRC. Which means they have paid your partners tax twice and is entitled to recover what they paid to your partner, that should have originally been deducted in tax, back from your partner.

Cynthesys, your thread is not the same, as this doesn't relate to tax codes or amounts being claimed from x months a go, but a clear calculation error by the employer - Each person is responsible for ensuring they are paying the right amount of tax, even though liability can be transferred to the employer and HMRC can then reclaim from the employer, the OP's partner here was still paid more prior to tax deductions then what they were entitled to if the employer had not miscalculated. So the OP partners employer is entitled to reclaim what sum of tax paid to HMRC from the OP partner as an overpayment of wages.

For example:

Say the the OP partner weekly wage before tax was £200 and tax was say 20% prior to deductions and pension deduction was £5 per week.

The employer wrongly deducted the £5 first and then worked out 20% tax on the remaining £195 making tax payment of £37.50 (£195/1.2 = £162.50 (195-162.5 = £37.50) and paying the op's partner £162.5 per week after deductions. The actaul tax that was payable was 20% of the £200 which would have been £40 per week meaning the OP partner should have received £160 per week minus £5 for pension leaving a total of £155 paid to the employee.

Say the under payment of tax occurred for 52 weeks thats £2.5 per week which is £130. which means that because the OP's partner was paid £162.5 per week instead of £160 per week prior to £5 pension deduction, the employer had overpaid the OP's partner £130 over 52 weeks 2.5 x 52.

But as they have paid the £130 to HMRC as well, the employer has now paid an overpayment in wages of £130 to the OP's partner as well as £130 to HMRC. So the employer is owed £130 in overpaid wages as a result of the overpayment of £2.50 being paid to the OP's partner over those 52 weeks. So until the employer is paid back the employer is £130 out of pocket, compared to what they would have in the pocket if they had not worked the tax out wrongly. And even though the employer worked out the tax wrongly, it doesn't change the fact that as a result, the OP's partner was paid more than what she should have been paid, and therefore owes the employer the same amount that the employer had to pay to HMRC in tax, as overpayment of wages.