Are HMRC entitled to collect tax through PAYE while an appeal against the paye code is in progress?

Are HMRC entitled to collect tax through PAYE...

Didn't find your answer?

I appealed under ESC A19 against an underpayment (under £2,000) for an earlier year by letter on 28 April 2011. HMRC declined by letter on 31 May. I wrote back on 30 June, which remains unanswered. On 4 July they issued code to collect underpayment. I think it would be reasonable to delay code change until appeal is settled as this could drag on for some time. HMRC insist the change cannot be delayed, but are unable to give any authority for their action. Are HMRC allowed to do this?

Replies (2)

Please login or register to join the discussion.

avatar
By Anne Fairpo
19th Jul 2011 15:23

PAYE regs/judicial review

Broadly, HMRC will automatically code out an underpayment of less than £2,000 except where the underpayment arose out of a self-assessment return and the taxpayer has objected to the coding out (reg 186, Income Tax (PAYE) Regs 2003).

Where the underpayment is less than £2,000 but doesn't arise from a self-assessment return then HMRC _may_ code out the underpayment (reg 188) – it's not an automatic code out. In practice, HMRC will usually code out to recover the underpayment. However, there's no opportunity in the regulations for the taxpayer to object if HMRC does decide to code out, so the only way to object is to seek judicial review of the decision.

So: if the taxpayer submitted self-assessment returns, and the underpayment arises from the returns, then the taxpayer should be able to object to the coding out under Reg 186. If the underpayment was not in a self-assessment return, or HMRC carry on with the code out even where the taxpayer has objected under Reg 186, then the only way to try to stop the coding out is to request a judicial review of the decision.

However, note that this won't stop the coding out unless/until the judicial review application has been heard and decided in the taxpayer's favour. A judicial review request is made by application to court; given the amount of PAYE/tax at stake, it may not be a particularly cost effective option.

Thanks (0)
Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
19th Jul 2011 15:48

Yes

The tax code stands, even if it's under dispute.

I have this with someone who's had a P800 that has been escalated to complaint under A19. The tax code stands, and the tax will be refunded if the complaint is upheld and the tax code changed.

Thanks (0)