BIK Issue

MisterCrown

Hi,

I have just learnt my employer has been calculating my BIK wrong for the last couple of years and has under-declared my income, tax, PRSI & USC.

the shortfall has around been €1,000 a year. Who is responsible to pay the shortfall, me or my employer?

Thanks

john1270

Approaching this on a practical basis my view is that it would depend on how this underpayment comes to the Revenue's attention. If it comes to their attention during the course of a tax audit then the Revenue will, most likely, look to the employer to make up the difference. If you bring it to the Revenue's attention then I would imagine that they will seek to recover it from you. On another practical level the vast majority of benefits provided are taxed through the PAYE system and thus it is not an unreasonable assumption for you to rely on the figures contained on your P60.

The technical position is that the employer is required to operate PAYE on BIK using a best estimate. The Revenue also have a right to recover any tax not deducted from the taxpayer.

dbran

Hi

Usually it is the employer who will have to pick up the tab.

The only time that the revenue would go after the employee is if there is some kind of obvious collusion involved and the employee was implicit in the error.

Regards

dbran

2ndcoming

I would disagree with the above. If the employer sends in an amended P35L figure with the new higher amount of taxable pay, Revenue will issue a P21 and seek the tax and USC from you.

Revenue do not audit company's payrolls, they audit their profits / sales which the company are liable to tax on. If an employee has not paid enough tax for whatever reason, company error or otherwise, it is they who are liable to tax on it, not the company.

Basically unless the company are willing to foot whatever bill arises they would not be legally obliged to do so.

dbran

2ndcoming wrote: »

I would disagree with the above. If the employer sends in an amended P35L figure with the new higher amount of taxable pay, Revenue will issue a P21 and seek the tax and USC from you.

Revenue do not audit company's payrolls, they audit their profits / sales which the company are liable to tax on. If an employee has not paid enough tax for whatever reason, company error or otherwise, it is they who are liable to tax on it, not the company.

Basically unless the company are willing to foot whatever bill arises they would not be legally obliged to do so.

Incorrect.

Its the employers obligation to operate the paye system correctly. That includes bik etc. The revenue do audit payroll and all aspects of the company tax obligations.

dbran

2ndcoming

I'm sorry but I can unequivocally guarantee you that is completely incorrect.

The onus lies with the taxpayer to ensure their taxes are correctly deducted.

This is quite basic.

Companies/employers are liable to their own VAT/corporation/income taxes, they are not liable to their employees income tax obligations.

They are obliged to declare and furnish the PAYE they have collected from their employees, after that it's in the employees' hands. If the employer has charged too much (e.g. emergency tax) the employee gets a refund. If the employer has charged too little, (e.g. unincluded income) the employee gets a bill.

Say the employer declares €50,000 pay , €7,000 tax €2,000 USC for employee A in 2012. It balances and that's fine.

Then this week the employer realises the company car employee A is provided with should have been included in the pay figure. They throw in the €8,000 for the company car, but they can't alter the amount of tax or USC they charged. The employee will now be left with a bill for the outstanding balance.

2ndcoming

Just going back to the OP, if as you said he's underdeclared all of them, ie the BIK, the tax and the USC, there shouldn't be a problem as long as they charged the right amounts in the first place. They just add them all on to the declared amounts.

The problem only arises when they didn't charge you enough tax and USC on the BIK.

Legend100

[QUOTE=2ndcoming;88739423 Revenue do not audit company's payrolls, they audit their profits / sales which the company are liable to tax on.[/QUOTE]

You must not have been involved in many Revenue audits as PAYE is very commonly audited by Revenue. I have had a number of clients who have been audited with penalties sought for incorrect operation of the PAYE system.

2ndcoming

That's a completely different thing, that's a penalty for what would have to be blatant misuse of the system, which would more than likely only be found where the client is suspected by Revenue of at least abuse of the tax system in general and more than likely tax evasion and they are seeking to find as much evidence of wrongdoing as possible.

It's not the same as saying if Revenue audit a company's payroll and the company hasn't deducted enough tax for some employees the company have to pay their tax for them!

Citizenpain

I wonder does this cover it - from the employers guide to paye

6. Errors discovered at the end of the year
The final figure entered on the employee's PAYE record for tax deducted should equal the total of the amounts actually deducted by the employer during the year. An employer who finds that there is a difference between the figures should enter the amount actually deducted as the final figure. If there was an under deduction of tax the employer may not recover it from the pay of a later tax year. The employer remains liable to pay to the Collector General the tax properly due unless it can be shown that reasonable care was exercised and that the under deduction of tax was due to a bona fide error

Legend100

2ndcoming wrote: »

That's a completely different thing, that's a penalty for what would have to be blatant misuse of the system, which would more than likely only be found where the client is suspected by Revenue of at least abuse of the tax system in general and more than likely tax evasion and they are seeking to find as much evidence of wrongdoing as possible.

It's not the same as saying if Revenue audit a company's payroll and the company hasn't deducted enough tax for some employees the company have to pay their tax for them!

Wasn't arguing the point about liability to tax from an underpayment, was simply correcting your clear error in stating companies are not audited for PAYE

2ndcoming

Clear errors galore, thank god I'm not trying to pimp my wares.

barneystinson

2ndcoming wrote: »

Clear errors galore, thank god I'm not trying to pimp my wares.

Have a look at Regulation 28 in the
INCOME TAX (EMPLOYMENTS) (CONSOLIDATED) REGULATIONS, 2001

http://www.revenue.ie/en/practitioner/law/statutory/si-559-01.pdf

And of course Revenue audit the operation of PAYE/PRSI by employers!

swanvill

Hi barneystinson,

Your link seems to be broken. Who do you think is liable to pay the shortfall in taxes?

Citizenpain

I think this is it
http://www.irishstatutebook.ie/2001/en/si/0559.html#article28

look at Regulation 28

barneystinson

swanvill wrote: »

Hi barneystinson,

Your link seems to be broken. Who do you think is liable to pay the shortfall in taxes?

Think I've fixed the link now.

I don't think anything - the regulation quite clearly puts the onus on the employer to correctly operate, deduct and remit, other than where Revenue direct that a shortfall be collected from the employee.

2ndcoming

So except in cases where the employer for some reason deliberately didn't deduct enough tax from their employees rather than through error (and this can be proven) the tax is recovered from the employees. That's the reality in practice.

dbran

2ndcoming wrote: »

So except in cases where the employer for some reason deliberately didn't deduct enough tax from their employees rather than through error (and this can be proven) the tax is recovered from the employees. That's the reality in practice.

No. The reality in practice is it is the employer who is liable to operate the PAYE system properly and pay for the extra tax liability if they have made an error. In 20 years working in practice I have never come across a situation where the revenue went after the employees instead of the employer for any shortfall in PAYE.

It is of course the taxpayers responsibility to ensure that their tax credits correctly reflect their own personal tax position. But as they are not subject to self assessment they are not normally obliged to file a tax return unless they have additional income which makes them subject to self assessment or if they ask for a P21 balancing statement to be issued. Only in those situations would they be required to pay any shortfall.

dbran

2ndcoming

Okay you know best. Hopefully the OP will come back and tell us how he gets on.

Mr. Incognito

Revenue do not in general go after the employees for shortfalls in PAYE for a number of reasons

1. Employers are a more ready source of repayment
2. Employees are seen as the innocent party

I see Regulation 4 being invoked on a more regular basis

http://www.irishstatutebook.ie/2001/en/si/0559.html#article4

4. Persons who are required to make any deduction or repayment referred to in these Regulations shall, in the case of a deduction (whether or not made), be accountable for the amount of the tax, and liable to pay that amount, to the Revenue Commissioners and shall, in the case of a repayment, be entitled, if it has been made, to be paid it, or given credit for it, by the Revenue Commissioners.

It is couched in the order Revenue seek to recover. They will go after the person who has the responsibility to account for the deduction and, unless there is collusion or some other irresponsible behaviour they will leave the employee alone. If the employer has become insolvent, or if there is a shadow payroll / cash in hand situation then they will go after the employee as a deterrent.

It is quite practical really.