Adam Shaw met with taxpayers affected by tax code issues
In Are You Paying Too Much Tax? Panorama examines the impact of HMRC's recent acknowledgement that six million people had been wrongly taxed in the past two years, with 1.4 million who underpaid now set to receive an unexpected tax bill.
John Whiting, Tax Policy Director at the Chartered Institute of Taxation, offers his advice on things to bear in mind if you get a P800 (tax calculation form) from HMRC in the coming weeks.
What should you do if you are one of the 6m expected to receive a P800 form in the next few weeks, relating to tax years 2008/09 or 2009/10?
First of all, check the information on it to see if you agree with the figures and calculations.
If you do agree and you find yourself in the fortunate position of being one of those who have paid too much tax, HMRC will automatically send you a repayment, usually within a week.
However, if you do not agree with the tax calculation, you can contact HMRC on 0845 3000 627, or you can write to the address shown on the calculation itself.
If you have paid too little tax and you accept HMRC's calculation, depending on the amount, one of four things may happen next:
1. If the underpayment is less than £2,000, HMRC will automatically spread the amount you owe them across its routine tax collections throughout the following year - 2011-2012.
2. If you do find yourself owing less than £2,000 but it would cause you hardship to pay it back in just one year, you can ask for the repayments to be spread over a longer period.
3. If the underpayment is £2,000 or more, HMRC will write to you and ask for direct payment. You can contact them on 0845 3000 627 if you want to discuss a repayment schedule. If you do agree a repayment schedule, they will waive the interest owing on this.
4. If the balance that you owe HMRC is less than £300, you will not be pursued by HMRC and the amount will be written off.
A few key points to consider if you are facing a significant repayment - you do need to agree a timetable for this with HMRC - do not assume it will be spread out in instalments.
If you fail to engage with the Revenue over this issue within three months and seven days of getting a demand, you may find yourself being charged interest on the outstanding tax.
There are some limited cases in which HMRC may forgo collection of underpaid tax, for example:
• Where they have failed to "make proper and timely use" of information they have received from the taxpayer, from the taxpayer's employer about their PAYE, or from the Department for Work and Pensions about the taxpayer's state retirement pension, or disability or widow's pension.
• Where the taxpayer "could reasonably have believed that his or her tax affairs were in order". HMRC needs to be persuaded that it was reasonable for the taxpayer to believe their affairs were in order, bearing in mind individual factors such as their knowledge of tax, state of health, and so forth.
If you think these circumstances apply to you, you can call HMRC on 0845 3000 627 and indicate that you are making a claim under 'ESC A19'. You will need to give the tax office some information including:
• What tax year and underpayment the claim relates to.
• What details HMRC failed to make proper and timely use of and the date this information was provided.
HMRC will then consider your claim but may need to verify details with you before giving a decision.
Note: This material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.