The appellant employed an individual whose PAYE tax coding was lowered during the tax year 2011/12. When the lower tax coding was input into the appellant’s payroll computer, it resulted for the relevant pay period (week 26) in the cumulative tax due exceeding the salary which the employee was due to receive for that period.
The payroll computer had been set up to operate, in those circumstances, so that no tax was deducted from employees’ pay. Consequently, not only was no tax deducted from the employee’s pay for week 26, but no tax was deducted at all for weeks 26 to 52. In addition, the payroll computer generated an ‘exception report’ identifying the employee with the entry “insufficient pay for tax”.
HM Revenue and Customs (HMRC) subsequently reviewed the employee’s tax liabilities, and discovered a tax underpayment resulting from under-deductions made by the appellant under the
