PAYE Tax Code Error - Challenge it!

KingKenny

PAYE Tax Code Error - Challenge it!
http://www.accountingweb.co.uk/topic/tax/hmrc-tackles-paye-error-backlog/447539
Speaking to The Guardian, ICAEW Tax Faculty manager Anita Monteith said that those taxpayers whose underpayments were the result of HMRC errors when calculating their tax codes manually would not have to pay up.
“HMRC can agree to give up collecting an underpayment if they had the right information to calculate tax deductions and did not use it when they should have done,” she said.

It would seem if you paid the correct amount of tax on you PAYE monies, and the correct amount of tax on you savings, but combined it pushed you into the 40% tax bracket by a small amount, then the HMRC had the correct information to adjust your tax code for the coming or future tax year. So in essence if they did not adjust your tax code, then the argument presented in the link would be correct, so you could challenge the money owed, as you paid your tax, they had the correct information etc.

Thats if this is an issue? Not sure if this is the case????


http://www.google.com/hostednews/ukpress/article/ALeqM5hiNtTAVvOHR4jru5M4RayjJUj03A


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Paul_Herring

“HMRC can agree to give up collecting an underpayment if they had the right information to calculate tax deductions and did not use it when they should have done,” she said.

So who is responsible for providing HMRC with the correct information? How many people bother examining their P2 to ensure it contains the correct details?

PAYE is a system for collecting potential tax due during the year so you don't have to pay in a lump sum at the end of the year. It is not a 'be all and end all' to your tax obligations, resulting in corrections at the end of the tax year to take into account the actual income received during the year (as opposed to the guestimated income which is what the tax code is based on.)

The logical obverse of the argument being presented is those who have overpaid shouldn't be refunded, since they too have 'accepted' their tax codes. Clearly quite a few people would be up in arms if this were the case.

Clearly, if HMRC are ignoring information that is presented to them (change of jobs with a higher salary, extra income etc) then they need to be spoken to, but if people (e.g.) aren't paying attention to their P2's, then they have little excuse to complain a year later when they're being asked to pay tax on income not mentioned in that P2.