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ESC A19 - Again

New client issued with P800's for 2007/08 and 2008/09 in October 2010 showing cumulative underpaid tax of approx £5,000. Client changed jobs during those tax year and BR tax code caused the liability as client is higher rate taxpayer.

Surely HMRC have failed to use the P45, P14 and P35 information in a timely manner as the P800's were issued more than 12 months after the end of the tax years?

HMRC disagree of course saying they "we have no record of receiving any information about your tax affairs whihc may have led to you not paying enough tax" - therefore what is the point of employers submitting P14's and P35's? Surely this is the information HMRC need?

Also if HMRC are unwilling to give up tax should the employer be culpable as they did not ask the taxpayer to complete a form P46 in the absence of P45?

Why is a taxpayer liable when HMRC do not use end of year PAYE information in a timely manner and employers fail in their duty to submit P46's.

HMRC have now issued tax returns to be completed for 2007/08 and 2008/09 - does this change any ESC A19 claim?

Thanks

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14th Mar 2012 11:37

I am about to embark on something for an employee (having gone back through PAYE online to check that all the codes issued have been acted on!) who has been with us since 2001 and in her other job for at least 4 years - she has had exactly the same thing happen (for £4.5k - she is a cleaner and is on her own - does 2 jobs to make ends meet at all).  She appealled and was told nope, it stands.  I have helped her out with a letter arguing that the revenue have failed to act upon information provided to them by both employers on a year by year basis, and that they have allowed the error to continue over more than 2 years, and that is was reasonable for her to hold the belief her tax affairs were in order.

Watch this space.

Any further advice anyone can give would be gratefully received.....

I know everyone should be aware of their own tax blah, blah, but this poor lady doesn't have a clue about this sort of thing and holds the belief, as many do, that PAYE means everything they owe must surely be being paid.

 

Of course what the other employer did I don't know (but it is the local council who SHOULD be on the ball with their returns etc).

 

So my answer is yes, I think HMRC probably do ALWAYS say no at the beginning hoping people will go away and negating the need to admit they got something wrong.

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By ACDWebb
14th Mar 2012 11:40

Did they have a P45 or not?

You say:

"Surely HMRC have failed to use the P45, ... information in a timely manner"; and

"should the employer be culpable as they did not ask the taxpayer to complete a form P46 in the absence of P45?"

Might the client not have noticed that they were paying a lot less tax than before as a result of the BR code? So could they be said to fall within the ESC.

Your difficulty following TC01852 is that there is nothing to appeal as things stand

"INCOME TAX — PAYE — taxpayers with too little tax deducted at source — HMRC seeking underpaid tax by means of Form P800 — ESC A19 — whether First-tier Tribunal has jurisdiction to consider discretionary concession — no — whether P800 an assessment susceptible of appeal — no — appeals struck out"

and to quote the closing comments

"As matters stand, however, the only course open to me is plain. The tribunal cannot entertain a challenge to the refusal to apply ESC A19 and, the tax due as a matter of law being undisputed, there is nothing which is within the tribunal’s jurisdiction. I must, and do, strike out the appeals. I should make it clear, for completeness, that nothing I have said bears upon the merits of each taxpayer’s position which, for the reasons I have given, I have not considered in depth. I should nevertheless add that if what they say is correct, I understand their sense of  grievance."

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HMRC doesn't accept p14/p35 as evidence

Despite the obvious fact that P35/P14 is the very best information that HMRC has, (far better and far more useful and complete than P45/P46), I believe that there are now many cases where HMRC has refused to accept its duty to have acted on P35/P14 in a timely manner. They've decided (how convenient for them) that only failure by HMRC to act on P45/P46 should be regarded as sufficient for ESC A19 to apply. I suppose that you can hope to get lucky with a particular official by pursuing it. I'd love to see a test case of this but I suppose that the chances of anyone taking HMRC all the way to the courts are remote.

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14th Mar 2012 13:05

LITRG

TomMcClelland wrote:

Despite the obvious fact that P35/P14 is the very best information that HMRC has, (far better and far more useful and complete than P45/P46), I believe that there are now many cases where HMRC has refused to accept its duty to have acted on P35/P14 in a timely manner. They've decided (how convenient for them) that only failure by HMRC to act on P45/P46 should be regarded as sufficient for ESC A19 to apply. I suppose that you can hope to get lucky with a particular official by pursuing it. I'd love to see a test case of this but I suppose that the chances of anyone taking HMRC all the way to the courts are remote.

HMRC choosing to ignore the P35/P14s is in contradiction of the wording of ESC A19, which refers to information provided by employers which is relevant to the coding for an employee.  What can be more relevant to a coding than knowing how much someone earns?  I recall that there was something issued by the LITRG which highlighted this particular point and suggested pointing out to HMRC that this approach was illogical, but have not been able to lay my hand on it.  Let none of us forget that HMRC's internal instructions are not statute

 

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19th Mar 2012 16:26

P14s/35s not counting

TomMcClelland wrote:

Despite the obvious fact that P35/P14 is the very best information that HMRC has, (far better and far more useful and complete than P45/P46), I believe that there are now many cases where HMRC has refused to accept its duty to have acted on P35/P14 in a timely manner. They've decided (how convenient for them) that only failure by HMRC to act on P45/P46 should be regarded as sufficient for ESC A19 to apply. I suppose that you can hope to get lucky with a particular official by pursuing it. I'd love to see a test case of this but I suppose that the chances of anyone taking HMRC all the way to the courts are remote.

 

Their non-allowance of the P14/35 information is based on a section of the wording of the concession itself which state "if it affects the tax code." HMRC's interpretation of this has been to ignore their failure to act on a P14/35 on the basis that their automated computer systems do not issue a coding notice upon receiving these sources of information. I would argue that the information itself DOES affect the tax code if the staff at HMRC actually do their job and periodically manually review each taxpayer (e.g. so many per year and rotate) and that it is precisely this failure to do what it is reasonable to expect them to do for which ESCA19 exists.

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No manual intervention was required if they did their jobs...

scottwright94 wrote:

TomMcClelland wrote:

Despite the obvious fact that P35/P14 is the very best information that HMRC has, (far better and far more useful and complete than P45/P46), I believe that there are now many cases where HMRC has refused to accept its duty to have acted on P35/P14 in a timely manner. They've decided (how convenient for them) that only failure by HMRC to act on P45/P46 should be regarded as sufficient for ESC A19 to apply. I suppose that you can hope to get lucky with a particular official by pursuing it. I'd love to see a test case of this but I suppose that the chances of anyone taking HMRC all the way to the courts are remote.

 

Their non-allowance of the P14/35 information is based on a section of the wording of the concession itself which state "if it affects the tax code." HMRC's interpretation of this has been to ignore their failure to act on a P14/35 on the basis that their automated computer systems do not issue a coding notice upon receiving these sources of information. I would argue that the information itself DOES affect the tax code if the staff at HMRC actually do their job and periodically manually review each taxpayer (e.g. so many per year and rotate) and that it is precisely this failure to do what it is reasonable to expect them to do for which ESCA19 exists.

They never even needed to do a manual review. Sweeping through this kind of mass information in an instant and listing all the people whose total PAYE income and tax for a particular year appears anomolous is exactly what well-designed computer databases do efficiently and easily. It is hardly the fault of taxpayers and employers that HMRC was so incompetent that it wasn't doing this (and to all appearances HMRC wasn't even requiring some large public employers such as public pensions and benefits to file P35/P14 at all, while fining the rest of us if we failed in that particular duty)

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By 4nick8
14th Mar 2012 12:11

I got £7,455 written off under ESC A19!

My clients circumstances were exactly the same as SE describes. After an initial rejection letter from HMRC they eventually caved in and wrote off £7,455!

Don't give up!

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14th Mar 2012 12:26

Thanks Tom - does make you wonder why we bother doing them at all!  They have merrily been handing me out coding notices for the employee on line so they obviously know she exists and works for us....  I am going to push for her - terrible blow for her.  And 4nick8 - I have no intentions of!

Keep us posted SE!

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14th Mar 2012 18:26

Paula reminds us HMRC guidance is not statute but then neither is ESCA19. HMRC can in effect chose to operate a concession in the way they chose to interpret it and unless and until omeone has the money to bring a case for judicial review of their interpretation there is not a whole lot that can be done about it. 

To the original poster I would suggest a very careful review of the facts. Is there any evidence no matter how slender that client may have contacted HMRC about anything on any occasion that might have constituted "notice" that she had the second job? 

You might also have grounds for requesting a review because of employer error/failure to operate the regulations surrounding new employees correctly. 

I would keep trying. 

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By CathyB
15th Mar 2012 10:08

ESC A19

I have a case where an elderly client for whom we submit an annual R40 was sent a refund for 2010/11 out of the blue.  We had not even started the R40, let alone submitted it.  On examination, it was clear that HMRC had used the figures for 2009/10!  I wrote twice re ESC A19 but each time was advised that there was no evidence that they had not made timely use of information.  Agreed, they had simply made an error and used the same information twice.  This is now an official complaint.

This has happened in the past and I was once told that it is sometimes because they pcik a taxpayer (sorry, customer) and train a new officer by letting them calculate the refund, but stop the issue.  Occasionally they get too excited and push the button issuing the refund!

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By ACDWebb
15th Mar 2012 11:17

@cathy.moore-sca...

Did you not get advice that the refund had been made, checkit and tell the client it was not due and needed to be repaid to HMRC? If so why should A19 be relevant in any way?

I had instances earlier in the year where HMRC ran the PAYE year end rec for 10/11 on an R40 client and repaid based on the rec and a single source. I had notification of the refund, recognised the FUBAR; told the client not to cash the cheque, but return it to me to send back to HMRC for cancellation, and told HMRC of their error.

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By CathyB
15th Mar 2012 11:25

ESC A19

Oh yes, but why should HMRC not pay for what was a stupid error?  If we don't kick up a fuss on this, how will they ever get things right?  Cash the cheque?  It went straight into the nominated bank account.

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By CathyB
15th Mar 2012 11:29

ESC A19

Have checked my file and the first we knew of this was when client sent us the repayment calculation.  This is 1 of those cases where we have acted for years but the 64-8 appears to have been deleted from their record.

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By ACDWebb
15th Mar 2012 11:47

But who ends up paying?

The rest of us surely, not HMRC.

Yours is really not a case that A19 was intended for, well IMHO anyway

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By lisler
16th Mar 2012 21:12

TC00263

I have a client in a similar situation. I came across this tribunal decision whilst exploring the issue. The tribunal found that although HMRC were in possession of all material facts it was not incumbent on them to search them out and use them! They used the following High Court case to support their decision:

Nicholson v Morris concerned fraud or wilful default, the only material point being that it was held in the High Court in that case that the onus was on the appellant to show that the estimated assessments were wrong.  In the course of his judgment in the High Court, Walton J said (at p110):

“… the Taxes Management Act throws upon the taxpayer the onus of showing that the assessments are wrong. It is the taxpayer who knows and the taxpayer who is in a position (or, if not in a position, who certainly should be in a position) to provide the right answer, and chapter and verse for the right answer, and it is idle for any taxpayer to say to the Revenue, "Hidden somewhere in your vaults are the right answers: go thou and dig them out of the vaults." That is not a duty on the Revenue. If it were, it would be a very onerous, very costly and very expensive operation, the costs of which would of course fall entirely on the taxpayers as a body.”

 What arguments can be used to refute this precedent?

 

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Seems like a terrible argument to me, but I'm not a lawyer

lisler wrote:

It is the taxpayer who knows and the taxpayer who is in a position (or, if not in a position, who certainly should be in a position) to provide the right answer, and chapter and verse for the right answer, and it is idle for any taxpayer to say to the Revenue, "Hidden somewhere in your vaults are the right answers: go thou and dig them out of the vaults." That is not a duty on the Revenue. If it were, it would be a very onerous, very costly and very expensive operation, the costs of which would of course fall entirely on the taxpayers as a body.”

 What arguments can be used to refute this precedent?

The fact that the argument is completely false when applied to P35/P14 information, using which a basic competently designed system at HMRC would easily reconcile multiple employments at year end without any requirement for "digging out hidden information"; just using the information they've got for the purpose for which it was designed. Since HMRC accepts P45/P46 as evidence of multiple employment why don't they accept the much easier and more conclusive actual pay figures in P35/P14?

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19th Mar 2012 11:54

ESC A19

Just thought I would add that I got my husbands underpaid tax of £1500 written off under ESC A19.  They refused twice, but we didn't give up, and took about 4 months to clear up. 

So it is possible. Ours was a case of HMRC having all the relevant information but not acting on it, (ie it was a case of having a company car being added in a tax year, but not changing his tax code for a long time afterwards).  We had all the paperwork to prove that they had been notified etc, and our argument was that they had all the relevant information, my husband had received all the information from his employer that HMRC had been notified, so my husband had every right to assume his tax affairs were in order. 

 

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19th Mar 2012 12:11

ESC A19

Had the same problem with a new Doctor/consultant, moved from one trust to another, did not receive P45 as the payroll dept dealt with both trusts. so the payroll dept passed it along. New payroll set up before old one shown as leaver. So they used BR for a higher rate employee. No P46 filled in and never collected. So I did ESC claim. A few weeks later got a call to say that the claim was being rejected as it was a PAYE employer error. So it was being passed to the correct section to pursue a section 78 error?

This was to invite the employer to settle the liability. (This is voluntary and can be refused). I commented "What happens if they refuse" then it reverts to ESC A19. As the trust monies come from the govt, then what a waste of time? I assume the trust refused to pay the tax as 2 months later ESC was allowed.

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19th Mar 2012 12:21

Inconsistent approach

My experience is that HMRC have a very inconsistent approach.

I have two clients with almost identical situations - both had more than one employment, additional employments used BR code but taxpayer was higer rate payer so underpaid tax for several years.

Wrote to HMRC to request A19 for both.  Both got rejected on first letter, one got accepted and written off on second letter.  The other is now with the Adjudicators Office.

In both cases the clients received P60's from all employments and I think they are therefore justified in assuming HMRC have all the info they require.  I know the guidance claims that P14's don't count as information provided to HMRC but how is the taxpayer supposed to know that.  I personally think HMRC's approach to such matters is appalling - most of the letters I receive are obviously fairly standard with stock phrases that on many occasions don't really apply to the case in question.

Good luck.

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19th Mar 2012 18:10

My broadcasts on Nick Ferrari's London Broadcasting Coy [LBC]

Back in October 2011, I was invited as a typical "High Street Accountant" to impart Tax Advice on the Radio (above).  I have been retained.

One of the topics that I focussed upon was precisely this point, and the fact that we had large write-offs of alleged tax arrears, brought in many enquiries - as well as new clients.

By being persistent, and emphasing that clients are not well-versed, as the tax system is not "simple" (Remember that phrase that was supposed to herald in Self Assessment?).   Quote "the man on the Clapham Omnibus" and reject all resistance from Her Majesty's Revenue & Customs [see I use full words, not initial letters that can so easily alienate people - and be mis-interpreted]  

 

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19th Mar 2012 13:55

esc a19

We successfully claimed esc a19 and HMRC "gave up" £25k of tax.

Our client has three sources of income totalling £75k all three taxed under paye, none had an HR code although one coding notification said something to the effect that as you are a higher rate taxpayer your coding reflects HR tax on interest received.

I should stress that this taxpayer was not represented at the time of the error, and thus believed her tax affairs were in order.

Our claim was intially rejected, and at the tiem of rejection an further earlier year of tax underpayment was found and assessed by HMRC, taking the tax from £16k to £25k

HMRC was accepted our argument when we appealed to a senior member of staff.

This process took months, our client was under the doctor for stress, but the outcome proved to be powerful medicine. Her stress went away.

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19th Mar 2012 14:54

P46 is an inadequate document

P46 is not adequate for the task. An employee filling one in has 3 options (my paraphrase):

Only job this tax yearOnly job but has had another this tax yearNot only job

There is no means by which the employee can say "not only job and I should be treated as higher rate tax payer".

Why on earth not? As lisler pointed out "It is the taxpayer who knows and the taxpayer who is in a position (or, if not in a position, who certainly should be in a position) to provide the right answer". But the P46 gives them no opportunity to do just that.

So an employer ends up putting somebody on a BR tax code (and has no alternative to doing this) when the employee is perfectly aware they should be on D0.

Bloody daft!

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19th Mar 2012 15:57

ESC A19

I have been sucessful with such a claim.  Similarly to Heatherhobbs it was in relation to benefits in kind.

I believe that the filing of P14/P45/P35 would count as sufficient information, on the basis that it would inform them of a 'change in income', which is one of the areas counting as information as per the HMRC website.  The filing of a P11D was sufficient in my case.

Please note, however, that the time limit for HMRC to make use of information is 12 months after the end of the tax year in which the information was received.  I wonder if for the 2008/09 year, HMRC's time limit would extend to 5th April 2011, as the P35 would have been filed by 19th May 2009, so in the 2009/10 tax year.  It would therefore worth asking the client to establish when the particular forms had been filed, if possible.  This may require your client to contact previous employers, which is exactly what my client had to do, but wasn't a problem.

I would certainly pursue 2007/08, but 2008/09 may not qualify, but would be very dependent on whether a P45 was correctly filed during 2008/09.

My case took numerous letters and phonecalls to HMRC, but they agreed in the end.  Persistance does pay.

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19th Mar 2012 17:24

HMRC - Declined tax payer, then our application

We are having similar situation. The taxpayer wrote initially and HM declined. A client put thyem on to us and we wrote and again declined advising if we are not happy we can write a letter to the Complaints Section.

We will, £7.5k at stake

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