Passing Tax

[johnjordan]

Would it be legal for wages that I earn from a part time job to be paid to my wife? As I am just below the 40% tax bracket but my wife has no income it would obviously be to our advantage if the wages were paid in her name.

 

I stress I do not want to do anything illegal.

 

Thank you.

[honeybee13]

Hello there.

 

I'm not sure what you mean. Maybe I could ask a couple of extra questions and when we have a bit more detail, I'll ask one of the site team to have a look.

 

Who do you work for please [please don't give us names] and are you employed or self-employed?

 

My best, HB

[johnjordan]

Thanks for your reply.

 

I have a full time job, Civil Service, plus a pension plus a part time job. Because, unknown to me HMRC erronously issued my pension provider with a tax code for no reason instead of leaving it at basic rate I now owe them a large sum of money which has left me with a negative tax code and means that every penny I earn over my full time wages and pension will be taxed at 40%.

 

However my wife does not work so her tax allowance is going to waste so I was wondering if it would be legal for my part time job employers to make payslips out to her for work that I will actually do thus taking advantage of her tax code, which incidentely is higher than what the pay would be.

 

Hope that makes sense.

 

ps I have now found out that either my pension provider or HMRC did not change my tax code for a second year running (2012/13) so now my debt to them has just doubled. As the pension provider does not send out pay slips one only finds out these things either by accident or when a P60 is issued. Now I can't retire until this is paid off.

Edited May 18, 2013 by johnjordan
adding ps

[honeybee13]

Thanks for your reply.

 

I have a full time job, Civil Service, plus a pension plus a part time job. Because, unknown to me HMRC erronously issued my pension provider with a tax code for no reason instead of leaving it at basic rate I now owe them a large sum of money which has left me with a negative tax code and means that every penny I earn over my full time wages and pension will be taxed at 40%.

 

However my wife does not work so her tax allowance is going to waste so I was wondering if it would be legal for my part time job employers to make payslips out to her for work that I will actually do thus taking advantage of her tax code, which incidentely is higher than what the pay would be.

 

Hope that makes sense.

 

ps I have now found out that either my pension provider or HMRC did not change my tax code for a second year running (2012/13) so now my debt to them has just doubled. As the pension provider does not send out pay slips one only finds out these things either by accident or when a P60 is issued. Now I can't retire until this is paid off.

 

Hello again.

 

Thank you for the extra information. I doubt very much if it would be legal for you to do the work in this scenario and for your wife to be paid for something she hasn't done.

 

However, I will alert someone on the site team who knows more about tax than I do and hope he can advise.

 

My best, HB

[slick132]

Hi JJ and looking in as asked by HoneyBee.

 

Three points :-

 

1. If YOU are earning the money, then it must be paid to YOU and taxed accordingly. The concept of your employer paying your wife, to make use of her otherwise unused tax allowance, is a complete non-starter for several reasons.

 

2. If HMRC had all the info available to them to properly manage your tax affairs, they should NOT have issued a "normal" tax code for the pension payments. The pension should have been coded "0T" so it was all taxed at the basic rate with no tax allowances allocated against it.

 

If the error is clearly that of HMRC, you can make a formal complaint about the matter asking that HMRC recognise that their failures have caused the underpayment and it is unfair of them to now recoup the tax using tax codes to collect the tax at harsh rates.

 

3. The issue of your wife "earning" your money would not help in any way with your repaying the tax underpayment that's arisen. If you pay tax at 40% to repay the debt, it will simply be repaid more quickly than if you repay it at the basic rate.

 

How HMRC entertain your complaint in point 2 will depend on your level of income and the size of the underpayment. In particular, if repaying the underpayment from your income is likely to cause you any impact or hardship you have grounds to ask that the underpayment is reduced or written off as "Official Error".

 

[johnjordan]

Thank you both for the replies. As I said, I have no intention of breaking the law so will drop the idea.

 

As far as the underpayment of tax is concerned I have already appealed twice and my MP has also complained on my behalf but they wont budge.

 

I'm sure I read somewhere that if they make the same mistake two tax years running then the rule that allows them to fob me off for one year would not apply. I'm just waiting for the latest P60 before I complain again.

[slick132]

Hi JJ,

 

HMRC's stance regarding tax underpaid due to their errors is dealt with under ESC A19. See here - http://www.hmrc.gov.uk/esc/esc.htm

 

They have a duty to use info in their possession to collect the right tax. However, the reg'ns are weighted in HMRC's favour in that they only have to " ........ have used the information provided within 12 months after the end of the tax year in which it is received to notify the taxpayer of any arrears."

 

Beyond this, you will have a hard time showing that the Extra Statutory Concession A19 applies.

 

As you say, check the situation when you get your 2012/13 P60 and then chase HMRC for their summary of tax due and paid for the year. You may have to submit your 2012/13 Tax Return to enable this.