# PAYE tax underpaid due to employer error



## mac2010 (31 Jan 2013)

I receive Medical Insurance as a benefit with my employment. My employer covers the full cost of the premium. They calculated PAYE on Medical Insurance incorrectly by calculating it on the Net Premium instead of the Gross Premium for a number of years.

In this case is my employer liable to pay this underpayment to the revenue ? 

In what year was it introduced that we had to pay tax on benefits such as Medical Insurance ?

For how many years would the revenue go back to claim back this underpayment ?


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## Joe_90 (31 Jan 2013)

2003.[broken link removed]

Have you been claiming the tax credit for medical ins?


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## mac2010 (31 Jan 2013)

Yes I have been claiming tax credit.


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## mandelbrot (31 Jan 2013)

So you've underpaid then. While it's very unfortunate and very annoying, it's you who owes this, not your employer.


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## Bateman (1 Feb 2013)

No. The employer has made the error.

Say the premium is €1,000. The employer gets a bill for €800 (i.e. net of TRS). The employer repays the TRS with its CT return. BIK is applied to the €1,000. The employee claims a credit of €200 in his/her income tax return or via his/her tax credit certificate.

In this case, the employer has treated €800 as the benefit in kind rather than €1,000.  The employer needs to correct its payroll and payroll tax returns. This may result in the employer seeking to recover monies from the employee, but in the few instances of this that I've seen, the employer has agreed to take the hit as a goodwill gesture.


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## elcato (1 Feb 2013)

> In this case, the employer has treated €800 as the benefit in kind  rather than €1,000.  The employer needs to correct its payroll and  payroll tax returns. This may result in the employer seeking to recover  monies from the employee, but in the few instances of this that I've  seen, the employer has agreed to take the hit as a goodwill gesture.


I don't think this is correct. As far as revenue are concerned, the employee owes them money not the employer. From what I can read here it is revenue who have notified the employee to say he has a tax liability.


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## Time (1 Feb 2013)

Indeed, revenue have identified a shortfall and are looking for it. The fact that the employer made an error is neither here or there. The employee is liable.

The revenue may even go to say that the employee should have taken proactive steps to fix the problem earlier. 

Bottom line the employee is liable not the employer.


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## porterbray (1 Feb 2013)

As pointed out above, the payment of tax is ultimately the responsibility of the taxpayer, and it is the taxpayer that Revenue will hold liable, not their employer.


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## Joe_90 (1 Feb 2013)

elcato said:


> From what I can read here it is revenue who have notified the employee to say he has a tax liability.



I think that the OP has discovered the issue themselves and is concerned that Revenue may seek to recover the underpayment from them.


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## Bateman (1 Feb 2013)

An employer has being providing an employee with a benefit in kind worth (say) €1,000 but only accounting for payroll tax on €800.

This is primarily an employer payroll tax issue.


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## mandelbrot (1 Feb 2013)

Bateman said:


> An employer has being providing an employee with a benefit in kind worth (say) €1,000 but only accounting for payroll tax on €800.
> 
> This is primarily an employer payroll tax issue.


 
Yes and the employer needs to amend upwards the gross pay figure for the relevant years to reflect the additional notional pay.

They notify the Collector General of these via P35 amendment to the individual P35Ls of the employee(s) affected.

They then reissue the employee with an amended P60 reflecting this figure.

The PAYE deducted doesn't change - they've deducted what they deducted, this is a historical figure and can't change now. Therefore unless they are willing to pay it, as is often the case in a Revenue audit scenario, and accepted on grounds of practicality (as it would normally affect multiple employees), then the employee's file sill show an underpayment of PAYE once the Gross pay has been revised upwards.


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## mac2010 (3 Feb 2013)

Is there any possible scenario where the company is correct to tax me on the net premium ? 

Example if I am taxed on net premium then I should claim tax credits on the net premium only ? 

By the way the revenue has not contacted me about this issue. I have discovered it myself. 

Thanks for all the responses so far.


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## Joe_90 (3 Feb 2013)

Not if they are doing it correctly.  You should pay tax on the Gross premium and then claim the credit.  Fix it from 01.01.13 and move forward....


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