Tax under-payment notification - help!

jem16

MimiJane wrote: »

IB would amount to about £1100 more than that figure ...

So tax code really should have been 162L, hence the underpayment. That alone would amount to around £220. Only a rough guide though without actual figures.

MimiJane

Not particularly near the figure of £700 though. Would it then be classed as "my fault" that the tax code has been wrong, or the fault of the Tax Office or pension provider do you think?

I don't really see how it can be my fault if I had no knowledge that anything was wrong and no change of circumstances to inform them of.

jem16

MimiJane wrote: »

Not particularly near the figure of £700 though.

As I said with no exact figures to work from it's only a rough guide. That was only for one year - also the tax code change could have seen a refund that you weren't entitled to in 2008.

Would it then be classed as "my fault" that the tax code has been wrong, or the fault of the Tax Office or pension provider do you think?

It's really up to you to be aware of your tax code and to query why it had changed.

I don't really see how it can be my fault if I had no knowledge that anything was wrong and no change of circumstances to inform them of.

You would have known though as your tax code changed and you paid less tax. Why didn't you query it with HMRC?

MimiJane

I know what you're saying, but with not having any notice of tax coding up until this year, how was I supposed to know? There are bound to slight adjustments with pension/benefit rises, so I didn't suspect anything.

Do you suggest I just let it go through then without querying it further?

Thanks again.

glider3560

The coding notice explains how they work out your tax code. It is ultimately your responsibility to check that the details are correct.

If I were you, I'd definitely check that your tax codes are correct for both years.

Mikeyorks

MimiJane wrote: »

Do you suggest I just let it go through then without querying it further?

Going back to your original, initially. With 5M people (allegedly) affected by under / over payment situations ..... there are no 'target groups' despite what the conspiracy theorists would have people believe. It's that for many years the PAYE system has run off 12 loosely linked databases (because there were 12 geographical processing centres) .... and this new system has brought all records together. Importantly, for the first time (after several teething disasters), it's allowed automatic reconciliations of PAYE income / tax due / tax paid. Something HMRC could never have done manually.

They appear to have drawn a line in the sand starting with 08/09 but it will be an annual event hereafter. Hopefully the majority of problems will be washed out on this first couple of years they are in the process of issuing. As most underpayments appear to have arisen where there are more than one income stream (multiple jobs or pensions). I suspect a number of those will be where sources were initially on separate databases.

To the present. You appear to have already queried relief under ESC A19 .... and that's been rejected. You can appeal that but I don't hold out a lot of hope :-

http://www.hmrc.gov.uk/esc/esc.htm

As you've written asking for a full explanation (HMRC would normally consider the P800 computation fulfills that?) ...... perhaps wait for a response before evaluating an appeal? I think Jem has mainly flushed out with you the majority reason for the underpayment ... but if HMRC add any light to the Code changes .. post back?

MimiJane

So, as I read it, it seems that they are at fault in that they applied the wrong tax code somewhere along the line and, as I didn't check it thoroughly as nothing seemed awry, I then have to "pay" for their initial mistake.

Although they may be technically correct in pursuing the under-payment, ethically they are not in my eyes.

It has to be worth pursuing (and I'm sure many people would in my situation).

Mike : not sure I agree about the "conspiracy theory" ... it's pretty well publicised that pensioners are being pursued for under-payments (unfairly in many cases). It's particularly annoying as my tax affairs should be pretty straightforward as no job is involved, so no mistake should have been made in the first place.

By the way, does anyone know (as mentioned in my first post) if they are obliged to give me a full explanation of why the under-payment has arisen? I've read that they are, but am not sure.

Thank you all for your input ... I understand it more now. I'll advise if I get anywhere.

Pennywise

You don't need to place any reliance on the initial rejection of ESC A19 - HMRC have been routinely rejecting these with standard reply letters and apparently no proper consideration of the actual circumstances. If you got a rejection within a couple of weeks of sending the claim, it's almost certainly the case that no-one actually bothered looking into your affairs properly as HMRC simply don't work so quickly - it takes weeks/months for them to do a proper review, especially given the number of ESC claims at the moment.

There was a recent statement issued by HMRC saying that they are now going to review ESC claims properly at first receipt and they're all being centralised to one group to consider them, in the hope of correcting the previously anomaly where two people with almost identical circumstances were being treated in different ways by different tax offices. They have also promised to properly explain the reasons if they reject your claim for ESC. We wait to see if they really do improve their handling of these claims.

If you've been on IB for many years and nothing has changed in the past two years, almost certainly you WILL be successful with your ESC claim if there are no other reasons (i.e. other new income sources or large increases in income from existing sources).

Have a look at these threads from the UK business forum PAYE group:-

http://www.ukbusinessforums.co.uk/forums/showthread.php?t=179874
http://www.ukbusinessforums.co.uk/forums/showthread.php?t=180034
http://www.ukbusinessforums.co.uk/forums/showthread.php?t=182802

The first thread is most relevant re IB as there's a quote from HMRCs own manual which says:-

"As they know the details of the claim, the DWP is responsible for determining whether INCAPACITY BENEFIT is taxable and notifying the Revenue when a person starts to receive taxable benefit. If there is any doubt whether INCAPACITY BENEFIT is taxable, the person receiving the INCAPACITY BENEFIT should be asked to seek clarification from the DWP."

What is interesting from that group is that the most common factor in these underpayments is that they are partly caused by government bodies, i.e. public sector/govt pensions or state benefits, especially IB!

For the ESC to apply for 08/9 and 09/10, firstly HMRC must have been told of the income sources - they clearly were because they'd have been receiving details of your income every year since it began, secondly, the underpayments must span several years, which they clearly do if your circumstances havn't changed for several years as you say.

You need to write back and appeal against their initial rejection. There's plenty of detail in the links above including a copy of a successful appeal reply letter from HMRC which you can/should print and send to HMRC to help your argument that you should be treated the same.

The link below is the key to your claim - from your posts, it seems your case is virtually identical, so please copy and send their response with your appeal as it has set a precedent:-

http://www.cheapaccounting.co.uk/blog/?p=942

Don't let HMRC get away with saying that it was your responsibility and that you should have known and told them your tax was wrong. The burden on you is simply a "reasonable belief" your tax affairs were in order - considering tax codes were issued by HMRC they clearly knew your income sources, and considering that several years have passed with no fundamental changes, it is was entirely reasonable for you to believe your tax affairs were in order.

MimiJane

Excellent! Thanks so much Pennywise for your detailed reply and all the links ... really helpful. You've given me much food for thought and, above all, hope

I'll look at all your links and have a good read.

As mentioned, I have written to them asking them for a detailed explanation of what's gone wrong, but want to be fully prepared to appeal if necessary.

Thanks again.

MimiJane

Just an update to advise that I was recently SUCCESSFUL in getting my £700 under-payment written off by HMRC :j

It took four letters, including an appeal and finally a complaint, but I persisted and it paid off.

My success is largely due to Pennywise, who pointed me in the direction of the UK Business Tax Forum (many thanks Pennywise:beer:) and the wonderful assistance I received from the said forum.

The only downside is that I've now received another under-payment for 2010/11, but a much smaller amount ... although strangely just above the threshold to be automatically written off I gather I can't appeal this amount as they've advised me within their time-scales, but I can cope with this and it should now be the end of it.