HMRC Mistakes And Your Tax Bill
Between now and Christmas mover five million people will hear that HMRC checks have
indicated that they have paid the wrong amount of tax last year or the year before. About 4.3 million of these will have underpaid and will be due a rebate. HMRC appear to think the recipients will be overjoyed but, although the refund will be some compensation, many will be asking why HMRC took too much of their hard-earned money in the first place.Even worse news is that around 1.4 million people will find they have additional tax to pay for the 2008/2009 and 2009/2010 tax years. For most people, the additional tax will be deducted from their tax code over the coming year, but for those owing more than 2,000, HMRC are saying that repayment will have to be made within three months. Initially HMRC were proposing to add interest charges to the tax owing but now appear to have backed down on this demand. We are also told that underpayments of less than 300 will not be collected.The bad news does not necessarily end there either as HMRC has admitted that it had a backlog of several million cases for tax years 2008/2009 and earlier! How on earth did such a situation arise? In HMRC's defence the problem was found because of their own checking of the PAYE process. PAYE has worked well as a system for collecting tax in the past, when most people had only one job, but people's work situations are often more complex these days and the system is struggling to cope.The people most likely to be caught in the middle of this are pensioners with more than one pension in addition to the state pension, high earners not in the self-assessment system, and those who have changed jobs, particularly if they have different job-related benefits in their new employment. Collecting the correct tax in these situations is not straightforward and, unless you complete a personal tax return each year, it may well be that you have paid an incorrect amount of tax.In short, the system is creaking and while changes are still being discussed, they may prove controversial themselves. Add to that HMRC staff reductions and low morale and you have a toxic mix. Successive governments want to collect additional tax and yet also reduce HMRC staff numbers. Maybe the problems we see now are just a consequence of an impossible situation together with an unresolved situation regarding more flexible working arrangements in the 21st Century.The Association of Chartered Certified Accountants has made available a template letter, published in The Sunday Times and available on their website, to help people challenge their tax demands under a special concession, although HMRC are denying that this concession applies in these circumstances. This strategy may or may not work, but taxpayers should not hesitate to write and object to paying tax which they find they owe despite doing everything properly.Initially the head of HMRC declined to apologise but has since changed tune markedly. I think it unlikely however that they will forget all the tax owing but gaining more time to pay in cases of hardship should be possible and it is always worth protesting. We are their masters after all!
HMRC Mistakes And Your Tax Bill
By: Ian Marlow
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