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UNDERPAID TAX

A potential new client has contacted me to help sort an existing tax problem. Apparently he has, following a conversation with a fellow employee, contacted the Revenue to advise he thought he was being undercharged tax. He has 2 employments, but neither PAYE code reflected this, the second only charging hime at basic rate. Unfortunately, he was correct in his belief; the Revenue has now investigated his file back to 2002/03 I believ, and is now demanding payment of overdue tax of £6000 within 30 days. I will be meeting the client next week, and will obviously be doing my own research b4 the meeting and following the meeting if I feel I can assist in this matter. In the meantime I would be very grateful for any opinions or details of potential sources regarding the following:

1. Is it reasonable for the Revenue to go back in this way, as earnings have been reported to them by the 2 employers throughout.
2. If so, is it reasonable for them to insist on payment over such a short timescale.

The client is obviously worried about finding the funds over such a short timescale, and feels he is punished for being honest; many would not have contacted the Revenue, and given this has been going on for several years, they may never have been picked up by them. Indeed, if he had not spoken to another employee, he would not have even known there was a problem; he had previouslyassumed all tax was being collected through his PAYE.

Any assistance regarding myquries, or anything I have not considered at this stage.
Stephen Davies

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By Anonymous
12th Nov 2007 08:31

ESC A19
If your client was unrepresented in the earlier years you could try the ESC A19. He had until recently thought his tax affairs were in order and both employers had reported his income to the Revenue each year.
Good luck
Mary w

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12th Nov 2007 09:55

Underpaid Tax
Thanks a lot. Will look at this on the Revenue website, and discuss with the potential client. If it is relevant, and gives any hope of at least either reducing the liability, or increasing the window to repay, the client's wife may decide to speak to him be fore Christmas.

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By Anonymous
12th Nov 2007 10:28

Underpaid Tax
I had a similar situation but for much less tax. I spotted that an underpayment from an earlier year (02/03) which should have been adjusted through my notice of coding in a later period had not occurred. This appears to have resulted from moving from self assessment to PAYE and a change of tax offices and the Revenue not updating / transferring records. Because it took HMRC so long to issue final statements for 05/06 and 06/07, I was not able to reconcile all years from 02/03 given the way they roll underpayments/ overpayments together. When I told them, apart from them claiming they would have picked it up - I don't think so! - they then sent a demand for payment in 30 days with interest accruing thereafter, no thanks for being honest. Although the amount was less than £300, I didn't see why they couldn't put it through the next possible years notice of coding as originally intended and as I had pointed it out to them. I complained and initially I just got a letter from them saying no but with no explanation. But after a few phone calls just asking for reasons why they couldn't do it, they finally conceded to adjust through notice of coding. So worth a try to defer / spread payment given it was their mistake and your client owned up. I appreciate though that the numbers are more significant in your case.

Good luck.

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15th Nov 2007 10:04

Thanks
Thank you both for your help. Have decided, after meeting client, to pursue a claim under ESC A19, having advised client not to assume anything, as this is a concesssion. If this is turned down, will try and agree payment under PAYE; the tax due is over £6000, and my client simply will not be able to find such a sum in 30 days. Strictly such a sum, as I understand it, cannot be collected through PAYE, but as it has arisen only through Inland Revenue failure to apply the correct code to his earnings, he hopes that the Revenue will be reasonable. I suppose expecting a reasonable approach is too much, so hope the ESC A19 claim is accepted.

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