This Content Was Last Updated on February 9, 2017 by Jessica Garbett


Article contributed by Tax Help for Old People, and written from the employees/pensioners perspective.

Can an employer approach their employee to make good underpayments of PAYE that the employer has failed to collect and pay over to HMRC on time?

It is becoming more common for taxpayers who have been successful in their claim with HMRC to remit underpayments due to employer error to find, that their employer is subsequently coming back to them to make good their mistake. Generally we see the employer demanding the money back in much shorter timescales than HMRC currently do.

It will depend on what a person’s employment contract says as to whether or not the money can be recovered out of their pay. While tax deductions in the ordinary course of events are allowed by law, it would seem reasonable that where the employer made a mistake and is now looking to recover it, some other factors of fairness etc. should come in.

The only thing we can suggest is referring to the guidance on Directgov:

And then, suggesting if a CAB might help, as the guidance says:

Rules for making deductions from your pay

Your employer is not allowed to make a deduction from your pay or wages unless:

• it is required or allowed by law, for example National Insurance, income tax or student loan repayments

• you agree in writing to a deduction

• your contract of employment says they can

• it is a result of any statutory disciplinary proceedings

• there is a statutory payment due to a public authority

• you have not worked due to taking part in a strike or industrial action

• it is to recover an earlier overpayment of wages or expenses

• it is a result of a court order or Employment Tribunal decision

A deduction must not reduce your pay below the National Minimum Wage rate (except a limited amount for accommodation). This applies even if you have given your permission for it.

If you were overpaid in error, instead of making a deduction, your employer may try to recover the overpayment by making an application for a court order.

For more information about how and when you might be able to prevent your employer from taking back an overpayment, you should speak to one of the following:

• a solicitor

• an Acas (Advisory, Conciliation and Arbitration Service) adviser

• a Citizens Advice Bureau adviser

• Find your local Citizens Advice Bureau office

There are restrictions on what an employer can deduct, so it’s definitely worth a person seeing if they can somehow appeal it or come to alternative arrangements.