HM Revenue and Customs

5. Mr R complains that HMRC will not give up a tax underpayment that happened between the 2017/18 and 2019/210 tax years because of errors his employer and HMRC made. He also complains that HMRC referred the underpayment to a debt collection agency, who want to collect the money at a monthly cost he cannot afford.

6. Mr R says he has spent a lot of time dealing with this over a three-year period. He says he has experienced much worry and stress.

7. Mr R wants HMRC to write off the underpayment because he believes his employer was responsible for it and should pay it. If this is not possible, he asks that he is at least allowed to pay HMRC a realistic monthly amount, instead of paying a debt collection agency.

8. Mr R explains he started a new job in August 2014 with the package including a company car. He says the car was not provided until October 2017 when his employer was in the process of being taken over.

9. In February 2018, Mr R says he asked his new employer’s accounts department about the tax effect of his company car use. He explains his employer gave him a specific form (known as a P46(car)) to complete and return, which he did.

10. Mr R says that from April 2018 his tax codes changed regularly and in August HMRC told him there was a tax underpayment that he needed to pay. He explains that after complaining to HMRC about the underpayment, he also found it had not processed the fuel allowance part of his P46 (car) form.

11. Mr R complained to HMRC about this in February 2020 and made one payment towards the amount owed. He complained again in November 2021 and got a response in February 2022 advising that the underpayment did need to be paid.

12. He escalated his complaint in March 2022 and HMRC sent its final response in November. It did not change its decision but gave him a one-off payment of £50 to recognise the delay in adding the fuel benefit to his account. This led to Mr R referring his complaint to the Adjudicator’s Office (AO) in January 2023 (the AO is the next stage of HMRC’s complaints process).

13. The AO partly upheld Mr R’s complaint. It explained that HMRC did not provide him with an acceptable level of service when he complained and recommended it pay him another £100. It did not uphold the part of Mr R’s complaint about the underpayment as it felt HMRC had followed its guidelines in deciding not to write this off.

14. Mr R wrote to the AO and pointed out that it had made an error in its report. It replied and agreed that completing the P46 (car) form was not Mr R’s responsibility, but his employer’s. Despite this, the AO explained there was no basis for the underpayment to be written off because Mr R still had a responsibility to tell HMRC about changes that affected his tax code. Because of this, it did not change its position.

17. Before we decide if we should consider a complaint further, we look at whether there are signs the organisation got something wrong. We do this by comparing what should have happened with what did happen. We have done this and have not seen any signs that something has gone wrong.

18. There seems to be no dispute that the main reason for the tax underpayment is that HMRC was not told that Mr R had a taxable benefit, the company car.

19. Mr R’s employer would seem to be partly at fault here. As the AO explained to Mr R, his employer should have completed the P46 (car) form to give HMRC the information it needed to adjust his tax code.

20. His employer not doing this is a matter between it and Mr R and not one that HMRC or we can get involved in. If Mr R feels he has been negatively affected by his employer’s actions he should direct his complaint to them.

21. The AO also pointed out that Mr R had a responsibility to tell HMRC about any changes that may affect his tax code, but he did not.

22. In its report, the AO correctly found that ESC A19 is the guidance that applies to this case. ESC A19 (Extra Statutory Concession A19) is part of HMRC’s PAYE Manual (Pay As You Earn is tax for employed people). It gives HMRC limited discretion to decide if it should give up collection of tax in cases where an unexpected tax bill has arisen.

23. ESC A19 includes when a tax underpayment happened because of an employer error. If the criteria is met, the tax underpayment would be collected from the employer instead of the employee. But, as the AO explained, to meet the criteria the employer must have been using an incorrect tax code, failing to deal with the start or end of employment forms correctly or applying a tax status incorrectly. The circumstances here, an employer failing to tell HMRC about an employee’s car and fuel benefit within a particular time period, does not qualify as an ‘employer error’ for the purposes of ESC A19. This is because the employee also has a responsibility to tell HMRC if they are getting taxable benefits that have not been included in a tax code.

24. ESC A19 also sets out that to give up collection of an underpayment, HMRC must have failed to make ‘proper and timely use’ of information given to it. It explains that ‘tax will normally be given up only if the taxpayer could reasonably have believed that his or her tax affairs were in order and was notified of the arrears more than 12 months after the end of the tax year in which HMRC received the information indicating that more tax was due, or was notified of an over-repayment after the end of the tax year following the year in which the repayment was made.’

25. The company car benefit does not meet these criteria as HMRC did not fail to act on information given to it. ESC A19 cannot be applied to this part of the complaint.

26. With regards to the fuel allowance part of the complaint, HMRC did fail to act on the information Mr R gave it. When it updated his account to show the company car benefit, it failed to record his personal fuel benefit. It added the fuel benefit to his account on 27 February 2018 and told him about the underpayment created on 7 August.

27. The AO correctly found that ESC A19 did not apply to this part of Mr R’s underpayment because although HMRC made the error, it told Mr R about this within 12 months of the end of the tax year in which it received the information. The end of the tax year was 5 April 2018, with it telling Mr R about his underpayment in August of the same year.

28. Although HMRC found the personal fuel allowance error, HMRC did not update Mr R’s records to show the fuel benefit information for a second time in August 2018. This led to it not including the information in Mr R’s tax code for the 2018/19 tax year. There is no suggestion that Mr R contacted HMRC to query why this was the case.

29. HMRC became aware of its second error on 6 August 2019 and it amended Mr R’s tax code for the 2019/20 tax year. It also told Mr R about the extra underpayment for the 2018/19 tax year. Again, this was within 12 months of the end of that tax year (5 April 2018).

30. The AO explained that where such errors are found but notification has been given within 12 months, HMRC could potentially write off the underpayment in line with ESC A19 rules if it has made an error more than once and has allowed the underpayment to increase over two full tax years.

31. It is clear that HMRC did make an error twice.

32. But, it did not allow the underpayment to increase over two full tax years as the second error related to April to August 2019 only.

33. We understand how distressing it must have been for Mr R to get large tax bills when he felt he had done nothing wrong. We appreciate his point of view on this and can see that both his employer and HMRC made errors which added to this situation. But, Mr R also contributed by not contacting HMRC to tell it he was getting taxable benefits and then in not querying the lack of fuel benefit in his tax code.

34. While we accept it may seem unfair to Mr R, we think that HMRC and the AO correctly decided that HMRC is entitled to collect the underpayment from him.

1. We have carefully considered Mr R’s complaint about HM Revenue and Customs (HMRC). We are sorry to hear about the worry and stress he experienced after being told he needs to pay back tax because of an error his employer made.

2. Although it is not disputed that Mr R’s employer failed to tell HMRC that it was providing him with a company car (a taxable benefit), Mr R also had an obligation to tell HMRC about this.

3. We do not doubt that getting a big tax bill unexpectedly would have been very distressing and difficult, but HMRC correctly told Mr R that his case did not meet the criteria for it to give this up (write it off).

4. We are also sorry to hear that he is struggling to afford the payments now due to a debt collection agency. This is something he needs to resolve with HMRC and the agency directly.