Having a problem with your employer?

We put a lot of faith in our employers, however, things can sometimes go wrong. As an employee, your employer is responsible for paying your tax to HMRC, but there are times when they may not do this.

Employment status

Some employers will try to avoid their responsibilities by treating their employees as though they are self-employed. This can leave employees in trouble.

If you are listed as self-employed by your employer then you are responsible for paying your own tax and National Insurance through Self Assessment. You will also lose out on some employment rights, such as rights in redundancy.

Workers, particularly migrant workers or people just entering the workforce who are unfamiliar with the UK tax system, can be at risk of being taxed as self-employed without knowing what this means.

Insolvent employers and those who do not pay tax to HMRC

An insolvent company is unable to pay the debts that it owes, and so may not pay tax contributions.

Some employers may deliberately avoid paying payroll taxes to HMRC and may do this by submitting inaccurate returns to HMRC. This is to make HMRC unaware of how much money is owed to them by the business.

In this circumstance, as an employee, your only evidence that your tax has been paid on your behalf is likely to be on your payslip. We urge you to keep your payslips in a safe place in case you need them in the future.

HMRC suggests that you should keep your payslips for at least 22 months after the end of the tax year they were issued. Although, some suggest you should keep them indefinitely.

Agency work and complicated arrangements

If you are getting work from an agency, you could sometimes find yourself in a complicated arrangement. An example is that some agencies will use an Umbrella company to reduce your tax liability or make it easier for you to find work.

You could find the firm withholds part of your pay to cover fees and tax deductions. Sometimes these fees are quite large, and occasionally the deductions made by the firm will not be available to you when you need to pay your taxes, putting you in a tricky situation.

Some of these arrangements made through firms like this can be an ineffective form of tax planning, and you could be landed with additional bills. So, rather than making things easier it could cause more stress further down the line.

There are rules which mean that many workers who work through complex structures (’employment intermediaries’) may be covered by the Agency rules and face being taxed as employees. In addition, from April 2016, your travel expenses from home to the workplace may be taxable.

You should take advice before entering any complex arrangements like Umbrella companies when working with an agency. You may need ongoing help from a tax adviser.

What can I do if I’m worried my employer is not paying my tax?

If you have doubts about whether you are employed or self-employed, or that your employer is not paying the correct tax HMRC then there are a few things you can do:

You need to ensure you have evidence of your employment, you can do this through:#

  • Payslips showing your tax and National Insurance deductions
  • Ideally, your P60 form from each tax year, and a P45 from your employer if you changed jobs

If you do not have this evidence, you could find that HMRC treats you as self-employed and expect you to pay any tax due.

Alternatively, even if it is agreed that you are an employee, you could find that HMRC still finds you liable for the tax which should have been deducted.

If you are unsure of your employment status, you can use the HMRC online status checker to obtain some guidance – https://www.gov.uk/guidance/employment-status-indicator

The results of this test are indicative only when performed by an employee. You should also read the guidance on employment status on the HMRC website.

Employment status https://www.gov.uk/government/collections/employed-or-self-employed

If there is a dispute about employment status, then you should seek advice from a tax advisor.