Burton v HMRC 2009 UKFTT 320 Mr Burton became an employee of Iris heading

 new business sales in Europe in February 2001. At the time of his joining Iris, he had not received a P45 from his old employer and he informed Iris that the form was to follow. Iris outsourced its payroll function but he failed to provide his P45. Basic rate tax was only deducted as a result. Mr Burton did not know of this and the Revenue pursued him for the tax.

An employee’s liability for underpaid tax is reduced if and to the extent that the employer has failed to account for correct income tax. Mr Burton however did not discharge the burden of proof that he had provided a form P45 to his employer. This meant that Iris were only obliged to deduct tax at basic rate even though he was a higher rate tax payer. Accordingly Iris properly operated PAYE and Mr Burton remained liable for the additional tax charge under self-assessment.

Key point: This case highlights the importance of employees ensuring that their employers operate PAYE correctly by determining that in particular the employer and HMRC are in possession of the correct documentation.