Ways to pay Tax Underpayment???

picardygirl

We've just received (well my OH) a letter saying that we have underpaid and giving the breakdown of the underpayment.

We cant dispute it, so know we have to pay it, but my question is, how do HMRC accept payments. We havent got the funds to repay the underpayment!

The letter said if they are to adjust my OH tax code the letter will state as such, which is doesnt, and if it doesnt we will be sent a letter stating ways to pay, which we have yet to receive.

Is the letter going to say please forward cheque for full amount? - or will they accept x amount per month for so many months etc, which is what we are hoping for and whats the maximum period they normally allow the underpayment to be paid back in.

Whats the best way of dealing with this problem ?

Thanks in advance for any help.

Gas_Powered_Toothbrush

How much is the underpayment? If it's over £2000, it won't go through the code.
If it's under £2000, get your OH to phone the tax office. Make sure they've got an accurate figure on file of his estimated income for the coming year, as this also affects whether or not the payment will be collected through the tax code. Assuming your OH is paid monthly, a coded underpayment will be paid back in 12 instalments. If this causes financial hardship, the tax office may be able to spread it over more than one year.

In short, phone them. And since it's January and the self assessment deadline's approaching, be prepared to wait a while to get through.

picardygirl

Thanks Gas Powered Toothbrush, the underpayment is £2700 so it wont go through the code.

We have just managed to get through on the phone (didnt think they would be open on a Saturday, and was in a queue for under 10 mins!), my OH spoke to a couple of very helpful people.

It was agreed over the phone we could pay back the debt over 36 months which is a huge relief, not trying to dispute the payment as already said ..... OH has two PAYE jobs, and the second one should have been taxed fully at 40%, which from April 2010 he has been, so this cant happen again!

They have said we would get another call at some time to confirm it and to set up payments etc but hopefully this is all sorted now.

Mikeyorks

picardygirl wrote: »

It was agreed over the phone we could pay back the debt over 36 months .

Purely out of curiousity did they indicate you would need to do that via Direct Debit? Or (further call expected) - not into that level of detail?

picardygirl

My OH specifically asked how we would be able to pay, as we wish to pay direct debit, as it makes it a lot easier for us. They said we could pay by either direct debit, bank transfer or cheque each month.

He also said they have said they will call anytime between now and March to set it all up, and they asked if they can speak to anyone else to set it up, which my OH said yes and gave my details to them, as he works full time and i dont, so i'm easier to get hold of.

Mikeyorks

Thanks for that.

I guess I was also trying to assess just how they are formalising these underpayments in order to create a due date. I'd expected them to transfer across to SA ...... but the '31st March' doesn't really align with that. So I'll just keep on musing!

Pleased you got it sorted.

jimmo

mike,
you've probably seen this already, but just in case...
http://www.hmrc.gov.uk/manuals/pommanual/PAYE90026.htm#IDAKNCBH

Mikeyorks

Thanks jimmo. I had seen that ........ but I can't believe HMRC are going to use that (Voluntary Payment) route for an alleged 1M underpayments.

It's old, it's tortuous, manpower intensive , prone to error and uses what HMRC term their legacy systems. Which is why, on several posts, I've advised people agains paying voluntarily in advance of the promised HMRC contact 'after 31st Dec'.

I expected HMRC to cut the underpayments across to SA .... then use the existing system there to set a due date of 31/1 and charge interest from that date. But (one of the problem with HMRC pages is that they're rarely dated - so you don't know how long in the tooth they are) .... your link did make me look around again.

And I'm a bit bemused to find this? Which does confirm the cut across to SA. But suggests that will be a skeleton record .... and an SA Return will be issued for each year a P800 has been issued with an underpayment?

Sounds like bureaucracy gone mad and rubbing salt in the wounds! Pay it voluntarily .... and that is it. But leave it to be collected formally and we'll add 3 more months for you to complete an SA Return. But again - I don't know how old this is? It references the P800 ....... which I had believed was a fairly new form. Perhaps I'm wrong ...... so I need to look out some old PAYE assessments I had from previous years.


http://www.hmrc.gov.uk/manuals/pommanual/paye90025.htm

jimmo

Mike,
I think your link has pinpointed the problems.
If a voluntary payment is made, all well and good, otherwise it is SA.
I was never directly involved with the mechanics of SA as such but in my days, as long as there was an SA record it was possible to add in an additional charge and set a due date.
I had a rough idea how to do this but I knew a man who can.
In some ways I can see the logic of using the voluntary payments route because it avoids setting up an SA record in the first place and definitely avoids the danger of issuing unnecessary Returns.
Also, with voluntary payments there can be no interest charges and whilst that may be counter productive it is in keeping with the old Schedule E /PAYE traditions of coding out underpayments for as long as it took or until it became a stranded underpayment.
My guess is that HMRC are prepared to forego the interest to avoid setting up SA records but I wouldn’t claim it to be an educated guess.

Mikeyorks

jimmo wrote: »

My guess is that HMRC are prepared to forego the interest to avoid setting up SA records but I wouldn’t claim it to be an educated guess.

I was looking at it from the sheer irrationality that having done a formal PAYE assessment. They will then effectively junk the resultant underpayment .... and start again on SA.

Doesn't seem to compute? They have the figures ..... why not simply cut them across? As you say ..... you can add a charge, in much the same way as you can add a determination in.

I'm still not convinced that link is current, despite the link to 'P800'. Must have a look through my old Schdule 'E' Assessments tomorrow and see if they have a Form number!

Mikeyorks

Mikeyorks wrote: »

Must have a look through my old Schedule 'E' Assessments tomorrow and see if they have a Form number!

Most relate to annual reclaims for the taxback on a Community Investment account. And the Assessment is on a R37T, which I assume is the companion document to the Payable Order. But the 04-05 Assessment is on a P800T.

So the P800 is not the new form I had assumed .... and the HMRC links may well be many years old. So it doesn't really advance my mild curiousity as to how HMRC will formally d/w the >£2k underpayments.

If they start issuing SA Returns with the consequences of due dates going back to 31/1/10 ..... I suspect we'll hear the screams fairly quickly.