MSE News: Thousands more could get tax written off using HMRC loophole

Sparta

I was made redundant in 2008. My redundancy payment was taxed at basic rate. Last autumn I received a tax return for 2008/9 which I completed. I have now received a substantial tax bill. I telephoned the tax office and was told it's because at the time of redundancy I was a higher rate tax payer. Can the ESC A19 loophole be invoked in this situation?

Mikeyorks

Extremely unlikely if the SA Return is for the year of the underpayment. You've now 'self assessed' and therefore the clock is restarted from that point. ESC A19 applies to delay using information - there is no delay if you're recently self assessed?

Sparta

Yes, I was self assessed, but it was three years after the event. I read in another site (see link below) that the employer is required to report lump sum payments to HMRC within the tax year of the payment and, assuming that they did so, HMRC should have been in a position to collect the tax at that time but didn't do so.
Oops couldn't post link. Google "employment law watch tax on termination payments".

Skint_yet_Again

According to HMRC website, ESC A19 will not normally apply in SA cases, but that does not stop you from trying to claim, especially if you are PAYE and ‘exceptional circumstances’ apply.

http://www.hmrc.gov.uk/manuals/sammanual/sam121450.htm

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

Hope this helps

dori2o

Sparta wrote: »

Yes, I was self assessed, but it was three years after the event. I read in another site (see link below) that the employer is required to report lump sum payments to HMRC within the tax year of the payment and, assuming that they did so, HMRC should have been in a position to collect the tax at that time but didn't do so.
Oops couldn't post link. Google "employment law watch tax on termination payments".

If the payment is made after the individual has left and the P45 issued then the employer does not have to make the payment known to HMRC until they file the P14 after the end of the tax year in which the payment was made.

This however has no bearing on your situation anyway.

You are looking at ESCA19 all wrong. The time limits refer to information that has been received in order to collect the tax due, as it becomes payable.

Up until 31/01/2012 HMRC, along with every individual in the UK, had the right to review any tax year within a deadline of 5 yrs 8 months (The following 31/01 5 years after the end of the tax year).

The information received, as decribed in ECSA19, does not include P60/P14 information.

The time limits as per ECSA19 have nothing to do with when HMRC can raise an assessment.

Unfortunately, unless you find a very lenient officer who ius dealing with ESCA19 claims, I don't see that you have a cause for the claim to be accepted.

justmaz

I had a coding letter in February 2012 giving me a tax code for 2012-2013 of 178L with no mention of any underpayment of tax & I have never had any letter stating that I have at any stage underpaid tax. Yesterday I had another coding letter with a code of K293 which replaces the 178L code. On the back of the coding notice its states the following....'You owe £945.60 from a previous tax year-you may remember us telling you about this before. I think this is their way of closing the loophole mentioned here! How can I prove that they have never informed me before? I dont even know the year this underpayment occurred. I worked for Tesco for 11 years prior to my retirement July last year so was under the illusion that as I was PAYE any tax I owed was taken care of. As they intend to recover monies due to them over the next 12months that will almost completely wipe out the £99 pm I get Tesco pension. What can I do? Any advice would be gratefully received.

chrismac1

You start asking the questions they won't want to answer unless they have excellent and accurate records.

1. Which tax year did this arise in?
2. Can you please supply a calculation for that tax year?

Don't be fobbed off until you either get this or get the tax written off. Once you get this calculation, come back here and we can see whether you have a case to fight them, probably yes based on what you have posted so far but this depends on which tax year this problem arose.

justmaz

Thank you so much for your reply chrismac, I will phone them tomorrow to try and get some answers. These problems always arise over the weekend when there is nothing you can do but worry! Thank goodness for the MSE forum and posters. I will post back tomorrow with, hopefully, more information and would appreciate help if it is at all possible. Thanks again

Mikeyorks

justmaz wrote: »

What can I do? Any advice would be gratefully received.

Did you start receiving a State Pension from last July? Which would - as its taxable - start to account for that level of underpayment. If so did you complete a P161 to tell them about it? Even if that's the case it sounds as though the underpayment will be estimated if it is for 11/12.

The Tesco pension alone will be well within your personal allowance.

justmaz

Mikeyorks wrote: »

Did you start receiving a State Pension from last July? Which would - as its taxable - start to account for that level of underpayment. If so did you complete a P161 to tell them about it? Even if that's the case it sounds as though the underpayment will be estimated if it is for 11/12.

The Tesco pension alone will be well within your personal allowance.

Hi Mikeyorks...thanks for your reply. I have been receiving state pension since July 2008 and working 2days pw for Tesco until July 2011. HMRC were informed and were taxing me by way of my salary. July 2011 I retired from work and was then receiving state pension and company pension of £99 pm. I have no idea when the underpayment supposedly occurred as the only information I have had is by way of my coding notice which doesnt give any details just the amount. Apparently they have 'informed' me but I have had no notification.