This is complicated but I am hoping someone can give me the correct advice as I don’t know how to approach this. In January 2008 I was made redundant from my job. After a lot of ‘tooing and froing’ i was paid a 'ex gratia' payment of £5083 which was the amount of a bonus due and the company paid the tax on that. I was also made to sign a legal 'compromise agreement' whereas my 6 months notice was termed a 'Payment in Lieu of Notice' from my employer. I was paid £24,205 with a BASIC 22% tax applied to the payment and a payment of £298 as employee *NIC on this. (*Can't work the basis for this payment out tho..)

I was then unemployed from 01 February until 01 December 2008. It has just transpired that my new employer in December ALSO put me on the basic BR rate as they claim they never received my P45 from my previous job. This is not true as they were given it. I have just been made aware of this in April 2010. - Yes it's my fault for not checking but a big shock to find this out. My P45 from my previous job finishing in Jan 2008 just shows 10 months employment details without the 'ex gratia' or the 'Payment in Lieu' amounts.

So, how do i work out how to sort out with HRMC the tax on this? It also crosses 2 tax years. If I split the 'Payment in Lieu' payment of my 6 months notice into 6 separate months and put 2 months of that into Feb and March 2008 for the 2007/2008 tax year and the next 4 months into the next tax year (2008/2009) April-July 2008, then no income (unemployed?) for period August-November 2008 inclusive then December 2008 - March 2009 (4 months) employment with my new employer and using Tax Free Allowances I get a refund of between £1800-3000 (varies due to how i treat NI with my Payment in Lieu and the period August -November) for the tax year 2008/2009.

However, If I apply the tax code that I was on with my previous job to the 'Payment in Lieu' amount and add the tax i had already paid in this job it comes out I should be paying about 3000 pounds more in tax than the BR tax I paid on the ‘Payment in Lieu’ plus the previous tax I paid with the company in that tax year (2008/09). I guess the question here is - is ALL the Payment in Lieu amount taken up as income in the 2007/2008 year finishing in April 2008, or can I claim it as a pro-rata payment spread out over 6 months and take it into the next tax year as it was a payment in lie of 6 months notice?

Furthermore, If I only give my current employer my previous P45 (again!) (which is all they want) it does not have any details of the ex gratia payment nor the Payment in Lieu on it. They say just do this for the tax office adjustment for the tax year 2008/2009 I worked with them and I will get a refund of the difference between the basic rate and what should have been the correct rate using tax free allowances - this is a clear calculation of a refund of £1255.

The 2009/2010 tax year difference between the BR and using the tax free allowances is pretty cut and dried as I have a company car and medical included which uses up all the tax allowance plus me paying about 600 – so that one is easy!

I apologise for this long winded post but In light of the ferocity shown by HRMC in with incorrect tax lately I really need some direction here!

Many thanks