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Last Updated: Saturday, 15 July 2006, 12:21 GMT 13:21 UK
Taxpayers told to check accounts
By Paul Lewis
BBC Radio 4's Money Box

Anne Redston
Anne Redston feels the letters will cause surprise

Thousands of taxpayers will shortly be receiving letters from HM Revenue & Customs asking them to check their accounts.

The Revenue is targeting individuals or professions who they think may be claiming too many expenses or not revealing all their income. Many will be individuals who the Revenue suspects have not paid enough tax on money in a bank or building society.

Tax offices are sending out 14,000 letters as part of a new attempt to get people to pay the right amount of tax without using their powers to begin a time consuming formal enquiry.

The Revenue may also telephone people - in some cases asking to visit to watch them fill in their self-assessment forms or see how they deal with cash.

The Revenue claims the letters - which they have no power to enforce - are voluntary. But refusing could risk a full tax enquiry. Anne Redston, chair of the personal taxes sub-committee at the Institute of Taxation, told Radio 4's Money Box programme

"That's what you have to weigh up if you get one of these letters. Would it be better to try to sort it out now in a quicker and less formal way or do it with the more formal procedures - with the possibility that might not happen."

Targetted letters

The Revenue insists that the letters are not being sent out at random. They are going out from selected offices to taxpayers where there is some reason to think they are not paying sufficient tax. They include self-employed people, employees claiming expenses for entertaining and clothing, and people who have interest from money in the bank which they have not declared.

But Anne Redston says getting a letter does not mean you owe more tax - the Revenue could be wrong

"Of course they might. You need to look at your own position and if in any doubt get help from a tax advisor or the Low Incomes Reform Group or TaxAid who will help low income tax-payers at no charge."

She also fears that some taxpayers may pay too much tax just because they have got the letter.

"Some people may find that they're so nervous about the risk of an enquiry they will say 'I'm not going to claim that in case I get into trouble for it.'"

And she hopes the Revenue will also try harder to repay tax that has been overpaid.

"Recent work by the National Audit Office suggests there are large sums owed to taxpayers which aren't being paid back. So it would be nice to see some initiative to link up with taxpayers who have overpaid their tax to make sure they get it back."

The Revenue told Money Box it wants "to give taxpayers information relevant to their circumstances, and help them get things right, while avoiding unnecessary paperwork. We are trialling new simpler, less time-consuming ways of helping our customers make sure they pay the right amount of tax."

BBC Radio 4's Money Box was broadcast on Saturday 15 July, 2006 at 1204 BST.

The programme will be repeated on Sunday, 16 July 2006, at 2102 BST

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