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How to challenge HMRC on underpaid PAYE from 2005-06

How to challenge HMRC on underpaid PAYE from...

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I am hoping someone can advise me about dealing with HMRC regarding the underpayment of PAYE from 2005-06. My client has all his tax calculations from HMRC since 2006-07. The 06/07 statement says they will collect £900 of underpaid tax through his new tax code. Having checked all his paper work, this amount has now been collected, as have all other amounts shown on his official P800T statements. He thought he had paid off all these amounts - and indeed he has, until last week he received a new calculation showing there is still nearly £1200 outstanding from prior to 2006-07.

I am looking for an arguement to challange this. I am thinking of saying that as he has never been made aware that this amount was outstanding, as it is not mentioned on any official statements, that it is unfair that he has to repay this amount. After all somewhere along the line it must have been HMRC's fault.

Does anyone have any experience of what works in this situation ?

Any thoughts greatly appreciated.

Marion 

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By taxhound
26th Apr 2011 18:29

Check, check and check again

Don't assume that HMRC are always correct with their underpayments brought forward.  On several occasions I have seen mysterious and incorrect underpayments creep in.  Sometimes they were correct, and then someone cancelled it (eg if the tax was paid), but it was only half corrected on the PAYE system, so the underpayment lives on in HMRC's calculations.

So my first task would be to check that this underpayment really does exist.

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By mitzra
26th Apr 2011 19:16

Underpayment on PAYE

 Thanks Taxhound.

I have just told my client what you have said and he is delighted to know that there is a possiblility of HMRC being wrong. I shall get him to dig out more paperwork and we'll see what happens.

Marion

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Woolpit Gus
By nutwood
27th Apr 2011 13:07

I had a similar situation

with a client who started a part time business in 2005/2006.  A payment was made in January 2008 for the liebilities fromthe start, including the first payment on account for 2007/08 - £2,200, but HMRC had agreed to collect the 2005/06 and 2006/07 liabilities through the clients PAYE code in 2007/08 and at some point they realised this and  in April 2008 repaid the £2,200 in full without retaining the part of the payment that should have been the first on account payment for 2007/08.  For some reason they didn't ask for the second 2007/08 instalment and the whole on account liability was not included on the client's statement of account.  Up until 2008/09 the client was doing her own tax returns and when I took on the work there were no prior year liabilities on the client's HMRC records.

Nothing surfaced until January 2011 when the payment due then and part of the payments made on account during 2010 were re-allocated to past years. 

Having checked everything I am sure that HMRC were due the whole of the tax they are now shoing on the record but their systems were certainly in error back in 2008 when they made a repayment they shouldn't have done and then failed to show that there was still tax unpaid.  A situation which carried on for nearly three years.

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By cathygrimmer
27th Apr 2011 13:43

HMRC could be wrong

As Taxhound said, HMRC could be wrong. I recently helped out a client's husband with a tax issue and noticed that HMRC had coded out a substantial underpayment - even though he had clearly paid the tax in a lump sum by 31 January (and it wasn't shown as overpaid on his statements - they would have collected it twice). He had no idea what was right or worng as there had been a lot of correspondence on his tax affairs - and would have paid if I hadn't spotted it. It also took me more than one attempt to get HMRc to put it right - I had to talk them through why it was wrong!

So do make sure it is really due.

Cathy

[email protected]

 

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By Robert Clubb
04th May 2011 12:12

Assuming................

Assuming that HMRC have got it right, but very late, and all the information made available to them when it should have been...............make a claim under Extra Statutory Concession A19.

If timely information was submitted by:

1.    A Taxpayer about his/her own income, gains or personal circumstances.

2.   An Employer, where the information affects a taxpayer's coding or

3.   The Dept fopr Work & Pensions, about a taxpayer's State retirement pension or widow's pension.

Tax will normally be given up only where the taxpayer:

a.   Could reasonably have berleived that his/her affairs were in order AND

b.   Was notified of the arrears more than 12 months after the end of the tax year in which the Inland Revenue received the information indicating that more tax was due. Or, if less than 12 months

c.   failed more than once to make proper use of the facts they had been given about one source of income

d.   allowed the arrears to build up over two whole tax years in succession by failing to make proper and timely use of information they had been given.

 

 

 

  

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By Simontax
10th Aug 2011 12:38

I echo the sentiments of Mr Clubb..........

ACCA have a template letter on their website which you can use: http://www2.accaglobal.com/uk/members/technical/advice_support/tax/income_tax/2010/P800

I have recently done this for my future mother-in-law and HMRC replied within a fortnight saying that they would write-off the outstanding tax. It was surprisingly easy. Best of luck.

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By spurs1952
04th May 2011 15:34

THE SIMPLE ANSWER

 Why oh why do the PAYE not send out accounts at the end of each year a statement detailing what was owing from the P35 less any incentive deductions, less what has been paid, and then you know where you are. If they adjust figures this too goes on the statement with an explanation of why. It's a mystery why they don't do this and this harking back to years before just helps employ a load of robots solve very little.

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By RodgerU
04th May 2011 21:44

Underpayment of PAYE

Marion

Why/how did the underpayment of tax arise?

In the first instance I would contact HMRC to establish the calculation behind the liability and the precise reasons the shortfall arose. From my experience and the information you have provided you are correct in your assessment that someone (other than your client) must be at fault - however you need to find out who!

We had a number of similar situations a few years ago (these problems seem to come like busses) and we won them all!

As I recall in every case they took time to resolve however as I would need information that you may not wish to post on an open forum to assist you please feel free to email me - [email protected] - if I can be of any help.

 

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By taxhound
05th May 2011 06:48

@Simontax

I can't follow your link.  Is it for members only?

Thanks

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By matcarpet
05th May 2011 15:59

P800's

If these P800's were processed as part of the reconciliation run in October 2010 then HMRC should not be going back any further than 2007/08. The tax should be written off under ESC A19, pointed out in an earlier reply.

[email protected]

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By mitzra
05th May 2011 20:03

P800s

Thanks for all the useful information given in all the replies. Carol thanks for confirming that liabilities prior to 07/08 are not going to be pursued. I shall definitely go ahead with the ESC A19 route, even HMRC website suggested that this is the way to go (when I managed to find the relevent page : PAYE 95005).  Thanks again

 

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By Simontax
10th Aug 2011 12:40

FAO Taxhound

The link has been amended and is avaible to all.

Best wishes.

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