Tax: Taxing new Employees

In Burton v HMRC, the Upper Tribunal confirmed that an employee can be assessed for additional income tax on employment income over and above the amount deducted by his employer under the PAYE system, when a P45 and P46 has not been provided. 

Mr Burton did not provide his new employer with a P45 and the P46 was not sent to HM Revenue and Customs before he was paid the first monthly instalment of his salary. When HM Revenue and Customs became aware that insufficient income tax had been paid on Mr Burton’s salary, it sought to recover the balance directly from Mr Burton.  Mr Burton argued that HM Revenue and Customs was prevented from recovering this amount as the employer should have deducted it under the PAYE provisions.  The Upper Tribunal disagreed.   In the absence of the P45 and P46, the employer was only required to deduct basic rate tax.  Responsibility for the additional tax therefore lies with Mr Burton.