Menu

Redundancy and Payroll Tax issues

11th January 2011

An individual with only employment income visited our office today. He was made redundant from his first employment (with severance package) and moved to a second job a few months later (within the tax year).

As is common, the payroll department that produced his P60 at the second company failed to accurately represent the income from salary, benefits and redundancy from his first employment. They therefore deducted the wrong amount of tax at source.

The individual has not received a notice to deliver a tax return and is hence outside the self assessment system. Or so he thought. On working through the first various payslips, P11D’s and P45 and P60 we calculated that he had underpaid (through no fault of his own) over £5,000 of tax. We rang the tax office after entering his employer reference number into the box at http://search2.hmrc.gov.uk/kbroker/hmrc/locator/locator.jsp?type=1 and spoke to the helpdesk. When we asked why he hadn’t been notified of the underpayment of tax the helpdesk simply told us that the calculation hadn’t yet been made (clearly 10 months is not enough time).

When we asked why not they explained that if an individual has more than one employment in the tax year and a six figure income that they must complete a self assessment tax return. This is not widely publicised and the individual will not be charged a penalty for submitting his tax return after 31 January 2011 (he has 3 months from the date of issue).

However, given all the mixed publicity surrounding P800’s – it is essential that you understand whether you fall into the self assessment system. If you have a query please contact your accountants.