UK Employees Face New Tax Demand

by Jason Gorringe, Tax-News.com, London

02 December 2010

Employees in the UK who were erroneously issued with tax refunds in the 2009/10 tax year may now be forced to pay that money back to HM Revenue and Customs in what is being described as the latest systems blunder by the department.

It has emerged that, where an employee started to receive taxable benefits for the first time in 2009/10, the tax authorities did not include the employee benefits as shown on forms filed with the HMRC when working out if people had paid the correct amount of tax for 2009/10 and so under-estimated individuals’ tax liabilities. This means that may people who just recently received a refund could now get a tax demand, which in some cases could total several hundred pounds or more.

Richard Mannion, national tax director at Smith & Williamson, the accountancy and financial services group, said that this development "couldn’t have come at a worse time, given that we are in the run-up to Christmas."

"No doubt the people affected will have already spent this money – only to find they have to repay it!” he remarked.

Employee benefits which are liable to tax and so included on forms P11D are very common, says Mannion. They cover, for example, health insurance, child care vouchers and company cars.

“Naturally, if you get a tax demand and disagree with it, the usual rules apply. So if you genuinely feel the tax request is incorrect, explain your reasons in writing and send this to your tax office," Mannion advised.

"Given HMRC’s recent poor record in answering letters, make sure you keep a copy of your letter and follow up if you don’t hear back,” he added.

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