HMRC briefing note: Coding out small debts
Employees who owe the taxman less than £3,000 in tax can pay the money in monthly instalments through Pay As You Earn (PAYE), HMRC has said.
From April 2012 HMRC will be able to collect debts up to £2,999 by amending the tax code of individuals in employment who pay tax through PAYE, or who have a UK pension.
Changes in an employee’s income or circumstances during the year may result in him or her not paying enough tax at the end of the tax year. When this happens, HMRC will send the employee a “P800 Tax Calculation” form telling them how much tax is owed.
HMRC guidance on using PAYE for tax underpayments says:
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Babs -
HMRC changed its policy and temporarily increased the threshold for coding out underpayments from £50 to £300 for the years from 07/08 to 9/10. I am surprised it is going for your £250.
I suggest that you query it - especially as this was its error.
Virtual Tax Support for accountants: www.rossmartin.co.uk
Beware paying through PAYE code
I have just received a claim from HMRC for £250 which they tell me is owing from 2008-09 and hasn't been paid through my code as they 'got the code wrong!' When I queried why they were claiming this now despite having given me a refund in 2010 of a larger amount and having also sent me three reminders in Nov & Dec to claim my £85 refund for this year I was told that it was due to the computer not realising it was still outstanding! If this was one of my clients I would look like a complete moron so I guess it is lucky it's my own returns!