In Poole Leisure Ltd v HMRC (2015) TC04315 the first tier tribunal (FTT) upheld an assessment made against an employer who had undercharged income tax to an employee due to a processing error.


  • The company employed a Mr Butcher in 2012. He did not present a P45, and instead completed a P46, stating that he had another job. He was therefore initially taxed on a BR code.
  • In November 2012 the other employment ceased, and HMRC duly issued a revised coding instruction to Poole Leisure.
  • The instruction contained the historical cumulative pay to date and tax paid; however the payroll agent misinterpreted the wording of the instruction, and omitted the cumulative figures from the next payroll run resulting in a refund of tax being effected to Mr Butcher via the payroll.
  • Mr Butcher then received an underpayment notification from HMRC, and disputed it, saying that it was down to the employer’s error and so they should pay the amount.
  • HMRC wrote to Poole Leisure asking for an explanation of the circumstances. After a period of correspondence, a Regulation 80 assessment was raised, on the basis that the company had failed to operate PAYE correctly. The company appealed, and requested and internal review; however the decision was upheld. It therefore appealed to the FTT.


The company was particularly aggrieved as it could not understand why HMRC refused to seek payment from Mr Butcher, as he had benefitted from the error financially. It argued that it had made a genuine mistake in processing the coding notice, and that this was not wilful.

The payroll agent made several submissions, even going as far as to accuse HMRC of bullying the tribunal judge into accepting extensive papers as evidence fifteen minutes before the start of the hearing. The accusation was dismissed by both HMRC and the FTT.

He FTT found that the assessment had been raised legitimately; as the prescribed circumstances set out in the PAYE Regulations (2003) were met. Additionally, the payroll agent had not set out in her correspondence how the error had been made in good faith when prompted by HMRC. The assessment was therefore upheld.


Poole Leisure Ltd v HMRC