How far back can HMRC go?

I have a client who was due a £56 tax refund and it's been applied to a very old debt

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Hi, I have a new client for whom I prepared the April 2018 tax return in December 2018, resulting in a modest £56.00 tax refund. HMRC have now applied this refund to a liability on her account for 1997/98. Looking into the detail, I believe she did not submit a tax return for 1996/97 (she thinks she was out of the country from 1997 to 2006) so HMRC applied a determination of £1,000. As a result, her 1997/98 account shows two expected payments on account of £500.00 each. And it it one of these payment on account that HMRC have applied the refund to. Previously the account 1996/97 and 1997/98 showed the debt as "no longer being pursued" I have written to HMRC, they suggest submitting the 1996/97 return - but the client has no information. Does anyone have any suggestions?

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paddle steamer
By DJKL
29th Apr 2019 21:25

Something niggles in my brain that there is no prescriptive period for tax debts.

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By Tim Vane
29th Apr 2019 22:19

All the note means is that they are not actively pursuing the debt but they will obviously keep the money, what else would you expect?

If the client has no info how can she be sure the assessment is not correct?

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Replying to Tim Vane:
RLI
By lionofludesch
30th Apr 2019 08:22

Jeez - she's not even sure if she was in the country.

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Replying to Tim Vane:
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By Cathy Milligan
30th Apr 2019 09:22

She only worked part of the year and no longer has her P45 from 1996. And then she did not work until she emigrated. The determination is just an HMRC estimate based on your guess is as good as mine. But high enough to trigger payments on account for the following year.

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By SteveHa
30th Apr 2019 08:54

What liability have those payments on account been applied to? Surely there would have had to be a 97/8 determination, too, otherwise they are payments on account of.....what?

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Replying to SteveHa:
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By Cathy Milligan
30th Apr 2019 09:19

The request for payments on account relate to the previous year's £1,000 determination. For more detail, she was employed for most of 1996 (cable and wireless), decided to go self employed about the October time but then her dad died, self employment didn't happen as she was sorting out mum, etc, and then early in 1997 they both emigrated. HMRC obviously issued notice to submit tax return which she did not get, and so HMRC applied a determination. But she has been back in UK since 2006, working and paying tax PAYE. Seems strange that HMRC have not contacted her before (not that they have even contacted her yet anyway)

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Replying to Cathy Milligan:
By SteveHa
30th Apr 2019 09:50

You miss my point. Although payments on account are calculated by reference to the PY liability, they are payments towards the CY liability. That being the case, there has to be a CY liability to set those payments against. If there has been no self-assessment and no determination, then there is no such liability.

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Replying to SteveHa:
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By Cathy Milligan
30th Apr 2019 10:16

Exactly, I agree. So how can HMRC apply her 2018 refund against an expected POA which is based upon a previous year's determination? There is no determination for the year to which the refund has been applied. I am happy to submit a nil return for the latter year as she was out of the country, but the earlier year is more difficult as she has not got her P45. Thanks.

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Replying to Cathy Milligan:
By SteveHa
30th Apr 2019 10:19

You'll probably find that you are on a hiding to nothing with regards to the year with a determination. A Return at this late stage is unlikely to displace that determination.

However, for the following year with no determination, arguably, a Return could displace the payments on account.

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By Cloudcounter
30th Apr 2019 11:20

It seems to me that for £56.00 it would cost far more than it's worth to get it back, even if that is possible

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By Cathy Milligan
30th Apr 2019 15:45

Thanks for all the input. Yes, I agree it's not worth the bother for £56.00 but I'm more worried about future possible tax refunds also being shoved back to the 90s. Handing it all back to the client now to decide and provide info for 1998 tax return. Thank you.

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