Page last updated at 16:30 GMT, Friday, 23 January 2009

HMRC relaxes online tax penalty

HMRC website
HMRC still cannot fix the computer glitch

Taxpayers have been told they will not suffer because of a problem with the HM Revenue & Customs computer system.

Hundreds are thought to have opted to pay their 2007-08 taxes via changes to their PAYE tax code for 2009-10.

This option on the Revenue's online filing system for self-assessed taxpayers should have been removed on 30 December, in line with the rules.

However a continuing computer glitch meant the option could not be switched off and is still on offer to taxpayers.

"None of our customers will be unfairly disadvantaged," said the Revenue.

Valid option?

The ability to opt for a lower tax code, instead of paying all the tax owed in one go by 31 January payment deadline, exists for anyone who owes up to 2,000.

We will write to customers who have not contacted us to see if they would like us to code out their underpayment in this way
HMRC

After 30 December the Revenue computer should have automatically "greyed out" the box on the online form that taxpayers are invited to tick if they want to use this PAYE option.

The idea was to give the Revenue enough time to tell employers what their employees' new tax code would be.

Anyone who opted, after 30 December, to pay their back-taxes this way might be unaware there was anything wrong, and might eventually have found their tax was not being collected through their monthly salary payments as they had intended.

That would have exposed them to interest charges on the uncollected tax after 31 January, and a possible surcharge as well.

"If customers use this option believing that having their underpayment coded out is still a valid option, we will show any underpayment in their PAYE tax code if they contact us and ask us to do so," said the Revenue.

"After 9 February we will write to customers who have not contacted us to see if they would like us to code out their underpayment in this way, provided they qualify under the usual rules."

No fix

A Revenue spokeswoman said that the problem with the online filing system had still not been resolved.

Anyone who decides now to submit their 2007-08 tax forms online may have missed the boat, unless they have already obtained the necessary PIN code from HMRC to access the system in the first place.

New users were advised to register for this by 21 January, as it would then be sent out to them by post.

If anyone registered after that date the PIN code was not guaranteed to arrive in time to let them meet the filing and payment deadline of 31 January.

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