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Businesses warned over employees’ tax bills
December 2011
Employers should to take extra care over PAYE, as they could be liable for their employees’ tax bills.
Many employees have recently received tax bills for 2010/11 and where there is a mistake in working out the PAYE due, employers can be caught out.
One common problem identified is the failure of employers to operate the correct tax code. Even though this may be because they have not realised it has changed, employers could still be responsible for footing the bill.
However, if employers show that “reasonable care” was taken in working out employees’ PAYE, HMRC may rule that the payment can be collected from the employee”.
Employers are being urged to suggest to their employees that they tell them about notices of amended codes they receive, particularly around February or March, as the new code might relate to the following tax year starting in April.
Experts say that if employers do spot an error in PAYE calculations during the tax year, they can correct it without asking permission of HMRC.
But where this will result in a large tax deduction in one pay period, employers can contact HMRC and ask to operate PAYE on a “week1/month1” basis.
This should reduce the big hit for the employee and also demonstrate that “reasonable care” has taken place which could mean HMRC will not come after the employer to settle the bill.
For further information please contact Steve Vickers, Tax Partner on T: 0114 251 8850 or email: steve.vickers@hartshaw.co.uk.
