This guest post is by TaxHelp for Older People, a national charity offering free tax advice to older people on incomes below £17,000 a year. The Helpline number is 0845 601 3321.
“I pay tax every month, how can I owe that much?” is the cry we hear daily at this time of year as people receive their annual tax calculation (P800) showing an underpayment.
Last month we discussed how to check your calculation, and promised this month to help you through the process of challenging it where you believe that something is just not right.
There are three main reasons that you may want do this:
- The figures do not agree with your own.
- You think your employer or pension provider has done something wrong.
- You believe that HMRC has all of your information but has not used it correctly.
In theory the first is the easiest issue to resolve. Just contact HMRC on 0845 300 0627 and give them the correct information. The P800 will be re-issued. If there is still an underpayment you may want to consider issues two and three.
The second issue is a bit harder to prove. It may be that your employer or pension provider has not operated PAYE correctly. For example, they may not have informed HMRC that you have started work, or if they did, have not operated the tax code HMRC have sent to them.
It can be quite tricky to spot a mistake, but looking for sources of income either not included in your calculation or tax codes or that are different from the coding notice issued to you (if you received any) are good warning signals. If this is the case, HMRC should seek the underpaid tax from the employer or pension payer, not from you.
You will need to ask HMRC to carry out a regulation 72 investigation. If HMRC choose not to pursue the employer, they should issue you with a regulation 72 direction, which will give you a right of appeal.
The third issue is the hardest to prove. If HMRC have made a mistake or failed to use information in their possession within a certain time, you can ask for the tax to be written off using their extra statutory concession A 19 (ESC A19).
This is not that useful for 2011/12 underpayments because HMRC has noticed the mistake within 12 months of the end of the tax year. But, if the underpayment is for earlier years, or if the mistake is continued over two or more years, it may still apply. There is no right of appeal against the final decision but you can still lodge a formal complaint.
Often it is difficult for the tax payer to determine where a mistake has occurred and it is wise to ask for both employer error and ESC A19 to be investigated from the outset.
Letters returned from HMRC can be very short telling you nothing, or conversely very lengthy and confusing. You may find it necessary to ask them to explain issues in more detail or to re-examine a particular point.
Don’t be afraid to continue pushing until you are satisfied with the response. And don’t forget, if you remain unhappy you are entitled to use HMRC’s complaint process, the Adjudicator and, if necessary, the Ombudsman.