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Warning for employers

A recent decision by the First Tier Tribunal (FTT) has potentially left an employer liable for an employee’s underpaid tax.  In brief, the taxpayer had a P45 showing his tax code at 375L month 1, with no income or tax details.  His new employer mistakenly operated code 375L and missed the month 1 basis.  This led to a tax underpayment.

HMRC initially requested the underpaid tax from the employer – but then agreed that it was not liable as HMRC was satisfied that it had taken reasonable care.

HMRC then asked the taxpayer for the tax; he appealed, saying his employer had failed to administer PAYE correctly, had not exercised proper care and attention, and did not have the necessary controls, checks and balances in place for the correct administration of PAYE.

The FTT expressed surprise that the company did not question the lack of information on previous pay and tax details on the P45.

The taxpayer was aware of his previous income, but had relied on his employer.  He had provided past payslips to his employer which could have been used to check the position.

The FTT agreed that the employer did not take reasonable care.  The taxpayer’s appeal was allowed.



Date: 16th September, 2014
Author: Cathy Corns


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