E'er did not pay Tax. Cannot find brown envelopes money paid in. IR want me to pay tax again 02/03 tax year

Question

I was paid in cash not via bank. Handwritten brown envelopes showed tax and NI deductions. I cannot find any of the envelopes so have no proof that as far as I was aware it was being paid. Inland Revenue want me to pay £1,500 AGAIN!!! Have contract of employment but unable to trace employer!!! Informed Inland Revenue of employment in all tax returns so it is obvious that I was not trying to evade tax and am now aware I was working for cowboy. Do I really have to pay again? HELP

Answer 1

You mention tax returns. Did you complete a return for 2002/03?

If so, I assume you put the amount of your earnings and the tax deducted in an employment supplement. When did the Revenue first query this apparent underpayment of tax? If you filled in a return and submitted it by the deadline of 31st January 2004 then the Revenue have to open an enquiry by 31st January 2005 at the latest. Perhaps you have a defence there.

If you did not complete a self-assessment form for 2002/03 then the situation is a little different. Is your contract of employment dated and signed? If so, ask the Revenue what evidence they have that you were not employed. If they accept you were employed then whether tax was deducted or not is a matter of fact. You have the right to have this matter heard by the Commissioners which is like a specialised court. You will be able to present your case and try to convince them that you are telling the truth.

If it is determined that you should have known that tax was not being deducted then you will have to pay. I think you need to take professional advice on this as soon as possible.

Answer 2

You should keep all your financial records for 7 years, and that would include payslips. It doesn't look like you paid much attention at the time you were working to ensure that you were given any formal statement of your earnings - a handwritten envelope just isn't good enough. Didn't you think there was something fishy going on?

My dad was once in a similar situation whereby he thought his tax was being paid and it wasn't, and yes, he did have to pay it all back. Whoever was taking the tax, wasn't actually giving it over to the inland revenue.

So if you are saying you paid the tax via your employer, they obviously kept it for themselves.

The only way possibly to get around it is to notify the police of fraud.

Answer 3

Sadly you do have to pay. However, you can ask the Inland Revenue what they're basing their calculations on as if they have no record of any NICs and tax payments, how do they know how much you earned in that time? You're supposed to keep wage slips for 6 years to prevent just this sort of problem. Apart from anything else, I know of few employees who get paid in cash these days. For everyone else out there - if your employer wants to pay you this way, be very suspicious.

Answer 4

Do contact the Citizens Advice Bureau, please. Whilst I agree with everything that is said elsewhere about record keeping I think that it cannot be that simple. Did you really fill in a tax return for all those years [most people do not have to!]. It seems an awfully long time to elapse between the tax year and finding out that the employer had not paid. In the "old days" they paid monthly and were chased if they were late.