Does anyone understand ESC A19? Underpaid tax

heidi279

Hiya all

I am probably just being extremely thick but I wonder if anyone can help me.

Last month my husband received a P800 showing that he has underpaid his tax. He owes £1065.80.

2008/2009 - £708.00

2009/2010 - £357.80

He has been a paramedic for 8 years and receives a small army pension (no changes to his employment/pension for 8 years). He is like most people and just left his PAYE tax matters in the hands of his employer and the Army pensions people.

From what I have read he may be able to appeal against the 2008/09 tax underpayment under ESC A19 because it is over the required time limit? I think they have to reclaim the tax within 12 months of the end of tax year? ie 2008/09 should be reclaimed by April 2010 - would that be correct?

Tried to call the Tax office but they were less than helpful and made him feel like a criminal for not getting it right!

Does anyone know if he can appeal against the 2008/09 underpayment?

If you could help I would be really grateful

Heidi x

Gertie_Walker

If the calculation he has been sent is correct, then there are no grounds of appeal. ESC A19 kicks in when HMRC has failed to make use of information given to them within 12 mths of the end of the tax year concerned, and the taxpayer had reasonable grounds for believing that his affiars were correct.
Unfortunately, its not the employer, pension payer or HMRC's duty to check your tax. Did your OH not contact his tax ofice pointing out that the pension was not being taxed? If he didnt do so, then HMRC have not failed to act on info given to them but they are not going back further than 2 years, so he has had 6 yrs tax free pension.
If he tried ESC, I think HMRC would argue that they were not informed of this liability and so he has to pay, but I know others on here would give it a shot.

heidi279

Hiya Gertie, Thanks for your swift reply, I appreciate it.

OH has been in receipt of army pension for 16 years and always paid basic rate tax on it (he receives £230 a month after tax as he was made redundant under options for change).
He has reached the top of his pay scale and is fully qualified now so is earning about £35,000 a year (this includes a lot of overtime).

I think what has happened is that in 2008/09 and 2009/10 he worked so much overtime to pay off our home improvements that if you combine the wages and the pension it must have pushed him over the tax threshold. I think he should have been paying 40% on some of it.

We are of course happy to pay whatever is due, but it just annoys me that the pension amount has never changed in 16 years (its not index linked until he reaches 55) and the taxman must know what he is earning, so I can't see how they can't marry up the pension and the wages to keep it correct rather than landing people with huge bills years later. I suppose I am being niave to think that in these times of technology there might be a computer programme that can work it out on a more regular/efficient basis.

I suppose the moral of the story is not to work too much overtime and keep yourself under the tax threshold?

Pennywise

Actually, the ESC A19 doesn't place any burden on the taxpayer telling HMRC - the wording mentions HMRC being aware of facts and not acting on them. I'd say that in this case, you should apply for the ESC and I'd stick my neck out and say that he'll probably be successful. Claim it for both 08/9 and 09/10. The grounds are that HMRC has repeatedly failed to act on information it has received, i.e. from the employer and pension provider, over several years. The usual time limits don't apply if there's a repeated failure "over several years". I think he'll have a good chance of the tax being written off for both years. There have been similar cases on this forum and over on the UK business forum of similar cases having the tax written off. It costs little to ask (paper and stamp) so you've nothing to lose and potentially a lot to gain.

moneyfoolish

Heidi. I would advise your husband to appeal under ESC A19. There was an identical case to your husband's highlighted on Panorama at the start of this month where a chap had an RAF pension which he had been paying basic rate tax on since 2006 when the Revenue should have been collecting tax at 40%. He owed over £11,000 and the Revenue wrote off the complete amount. He said he had provided all the information to HMRC and it was up to them to calculate his tax correctly under PAYE. I see Pennywise beat me to it so I would just endorse his/her comments.

heidi279

Thanks Russell and Penywise - sounds very positive and I thank you both for your replies.

We just felt a little miffed that we haven't done anything wrong yet seemed to be left holding this large repayment. I totally agree - every month the HMRC would have known what my OH had earned and what his pension was and I would think they should have taxed hm accordingly.

I will write to them and use ESC A19 and see how I get on - will keep you updated. I rwally am very grateful to you both. H x

moneyfoolish

Heidi. From everything I've read on this topic in the newspapers and on various forums, it seems that you will almost certainly get an automated rejection letter from HMRC by default. Don't be discouraged by this but immediately appeal and then your case will be looked at properly!

antrobus

heidi279 wrote: »

I totally agree - every month the HMRC would have known what my OH had earned and what his pension was and I would think they should have taxed hm accordingly.

Actually, no. HMRC don't know what anyone has earned in any particular tax year until the relevant employer (or whatever) has filed their end of tax year returns.

In the circumstances outlined above, I would guess that during 2008/2009 OP's husband earned sufficent from both sources of income to incur liability for higher rate tax, but not enough from any one source to trigger higher rate under PAYE. HMRC would not have known (and could not have been expected to know) that a higher rate liability existed until they'd married up the two bits of data.

You might get away with an ESC A19 claim for 2008/2009 on the grounds that HMRC is a year late in asking for the extra money, but it would be much less likely in respect of 2009/2010 as it would be perfectly normal (if my guess is correct) for HMRC to issue a demand for extra tax in these circumstances at about this time.

zygurat789

heidi279 wrote: »

We just felt a little miffed that we haven't done anything wrong yet seemed to be left holding this large repayment.

You may not have done anything wrong but you have (technically) failed to do everything that you should have done.
It is not up to the PAYE system to work out your total liability but merely to take tax on account of you until your final liability can be quantified (by you telling HMRC about all your income)
I feel everyone should have to file a tax return which would then be used instead of the myriad of forms for tax creit and benefit claims etc, etc, etc, etc.
Many people are completing these forms which, in many cases, are far more complex than a basic tax return

heidi279

Thanks for your replies - do you know what we could have done things differently because I would like to avoid this happening again.

You would think that the HMRC computer would be able to work out that my OH has two incomes (one of which never changes). There must be so many people, who have more than one income, in this situation and it just all seems a little incompetent.

I will do a letter and see where we go - like you say I might only get the reduction on 2008/9 payment - which would be great.

I really appreciate your help. Kind regards heidi x

zygurat789

heidi279 wrote: »

Thanks for your replies - do you know what we could have done things differently because I would like to avoid this happening again.

You would think that the HMRC computer would be able to work out that my OH has two incomes (one of which never changes). There must be so many people, who have more than one income, in this situation and it just all seems a little incompetent.

I will do a letter and see where we go - like you say I might only get the reduction on 2008/9 payment - which would be great.

I really appreciate your help. Kind regards heidi x

That's not their job - in law it's yours

The letter should include
Ref Numbers (from P60s)
Gross pay for each employment (a pension is merely a deferred salary)
Tax deducted from each.
Any other itaxable income (interest received etc gross tax and net) Tip if there is any transfer it into your name to avoid more higher rate tax.
With a bit of luck they will send you a tax return and you wont have this problem again..