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New guidance for taxpayers receiving coding notices

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8th Sep 2010
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The Low Incomes Tax Reform Group (LITRG) has issued a guide on what people should do if they receive a tax calculation letter from HMRC.

Around 45,000 taxpayers are receiving letters from HMRC explaining they have paid the wrong amount of tax, with 6 million expected to receive notifications by Christmas.

The letters refer to the tax years 2008-09 and 2009-10 and it is possible that people have both overpaid and underpaid tax in the two years. These people could receive two letters in the same envelope from the HMRC. The payments could cancel each other out.

The tax authority also confirmed that it would not charge interest on underpayments under £2,000, according to a BBC report.

For those who receive a letter but may not have access to a tax adviser, the Low Incomes Tax Reform Group (LITRG) has published a guide on what to do, which can be accessed by clicking here.

“Taxpayers receiving tax calculations from HMRC are in need of help – particularly if these show that they owe money to HMRC and they cannot afford to pay for a tax adviser. We do not feel that HMRC have done all they could to help the vulnerable and the uninitiated – something which we hope will be improved before the large bulk of the six million calculations are sent out,” said LITRG chairman John Andrews.

“Whilst it is difficult to generalise as an almost infinite variety of circumstances could apply, our aim is to provide help which people can then fit to their own situation.

“We will be refining our advice as further evidence of the nature of problems occurring becomes apparent. In the meantime, we hope that HMRC can improve their guidance, particularly for people without access to the internet. We also hope that in areas of doubt, of which there are many, they will apply a generous and sympathetic approach.”

In the House of Commons, Treasury Exchequer Secretary David Gauke gave a statement to MPs outlining the background to this week's letters to taxpayers. "The Exchequer is owed a total of approximately £2bn. The fact that we were left with the worst deficit in peacetime history means that we simply cannot afford to write off all the underpayments," he said.

However, he added that the government was taking action to recoup the funds as painlessly as possible. In cases of genuine hardship, HMRC will allow payments to be spread across a period of three years. "As was already the case, it will not pursue cases when the amount owed is less than £300 - that is an increase from the previous threshold of £50 - which applies to 40% of all underpayments," he added.

UPDATE 10 Sept: In response to the media furore of the past week, HMRC has updated its guidance on P800 PAYE Tax Calculations. The P800 letters – which are no longer being copied to advisers – advise those taxpayers of any over- or underpayment that has accrued from the 2008-09 and 2009-10 tax years through wrongly calculated tax codes, and advises them to check their code has been correctly calculated (with a link to P800 notes to help them do so).

The most interesting feature of the new page on the HMRC website is its response to claims in the press that underpayments could be “written off”. It will only consider doing so if taxpayers who provided all the necessary information ask for the repayment demand to be reviewed under Extra Statutory Concession A19.

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By Polly
13th Sep 2010 16:22

At last...

God save us from "financial experts".  I have been quietly fuming while reading and listening to media reports over the last week.  So much misinformation, some of it from people who should know better. Well done LITRG, the guide is spot on.  

A19 has always been my second favourite ESC.  Is there now a danger that it could be withdrawn after being found appropriate in so many of these cases?

 

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