advice re salary overpayment and AVCs

[financially]

This is a bit complex for me and my non financial brani so I'm hoping someone can advise me...
I was on mat leave last yr so was only on the standard rate of tax. My employer managed to both overpay me by €2600 one mth, and also deduct €800 towards AVCs that I had said i didn't want deducted.
So presently I am trying to decide what to do about both these issues as this yr I am on the high rate and so there are tax issues with both of them.

They are saying the longest I have to pay back the €2600 is 18mths so that means €145 gross/mth so I will be down €80/mth....considerable at the minute with 2 kids in creche mortgage etc!!
Also the AVCs...so €800 was paid in which I didn't want as I was on the low rate of tax and now my choises are to do nothing, or to take a 4mth AVC holiday now....also has a tax implication.

So my questions:
Are AVCs worthwhile if you're on the standard tax rate? if so probably I should leave the €800 there and keep paying in.
Is 18mths a reasonable time frame for the salary overpayment to be paid back?

thanks!

 

[oysterman]

If you were a standard rate payer all last year and will be a higher rate payer in 2012 and '13 while repaying this then you have saved approx €700 in tax from their mistakes and you have €800 in an AVC that you might be quite pleased with some day.

In that light the 18mths looks reasonable.

You could of course create a big stink and your employer might write off some of the sum owed....

Did the employer really "know" your AVC wishes? Is there a paper trail?

If you can afford the €145pm hit you might be best advised to do nothing. I'm sure I'll be slaughtered for this view.

 

[mandelbrot]

I agree with Oysterman.

Leaving aside the AVC issue, the OP got 2,600 of this year's (and next year's) pay in advance, and was only taxed at 20% on it, rather than 41%. So they have got €546 more than they would have if the boo-boo hadn't been made.

Taking this into account when you look at the AVC, they only received relief at 20% rather than 41% they'd have obtained if if they paid it this year, so they have lost out on €168 of tax relief there.

So between the jigs and the reels, taking last year, this year and the first 6 months of next year together, the OP's net pay is €378 higher than it would be if the mistake hadn't been made.

That doesn't mean it's not a pain in the This post will be deleted if not edited to remove bad language for you OP, as you are now down €80 a month til next year, but I'm just saying, the numbers do actually stack up slightly in your favour...

 

[financially]

I'm not sure I agree with your assessment fully. If I had not been paid the 2600 last yr I would have got some tax back that mth (no idea how much). But almost every mth that i was on unpaid leave I got tax back as had been paying at 41% earlier in the yr.
But your answers have made me think that possibly I shouldn't highlight this to the revenue..... maybe I'm coming out even except that of course I am down €80/mth for a long time....

Paper trail of AVC wishes and HR person says it does sound familiar (same thing happened last time and I got some money back from revenue that time as I made employer refund me the money paid in).

Why am I being made to repay when the govn say they cannot legally oblige Ivor callely to repay what he got incorrectly.....

 

[mandelbrot]

I'm not sure I agree with your assessment fully. If I had not been paid the 2600 last yr I would have got some tax back that mth (no idea how much). But almost every mth that i was on unpaid leave I got tax back as had been paying at 41% earlier in the yr.

It's irrelevant to talk about what happens in one month, or at one point during a PAYE tax year - your credits / std rate cut-off acrue cumulatively throughout the year. If you had got more tax back at that point, you would have ended up paying slightly more when you returned to work again.