Unexpected tax demand

geofft1947

Received a letter yesterday form HMRC containing three seperate tax calculations for 2007/8, 2006/7 and 2005/6 The later two show an underpayment of around £180 and an overpayment of a similar figure so they cancel each other out. However the BIG shock was an underpayment of almost £3000 for the year 2005/6.

The calculations show all the correct figures for my income and tax paid for that year, but at the end shows 'Other adjustments' which accounts for the underpayment. There is no explanation of what the other adjustments are, however there is brief note in the covering letter that mentions an underpayment for an earlier year. I normally dispose of all my income and tax docs after five years but still have records for 2005/6. However nothing before that.

I have absolutely no idea what the underpayment for a previous year is. I have written back asking for a fuller explanation. I have also gone down the route of ESC A19, but not sure whether that applies in this case.

I can't understand why they have suddenly decided to review my tax for these years. Do they do this for everyone, or have I been singled out for some reason. I retired in 2008 but was employed in these years and paying tax under PAYE so nothing unusual about my tax affairs.

Interestingly I have a letter dated November 2004 form HMRC which says that they will not be sending me tax returns any more which sort of suggests everything was in order at that time.

I'm totally baffled.

AirlieBird

geofft1947 wrote: »

I can't understand why they have suddenly decided to review my tax for these years. Do they do this for everyone, or have I been singled out for some reason.

They introduced a new computer system for PAYE a couple of years ago which allows them to better consolidate everyone's tax records. This in turn enables them to improve the processes to check that everyone is paying the right amount of tax. They've slowly been going through everyone's tax records for the past few years.

chrismac1

Sometimes these "other adjustments" turn out to be valid entries, sometimes quite simply they are made-up numbers in my experience. In the latter case, by asking specific questions about them they quickly collapse to zero. So you have a twin-pronged attack:

1. Ask for specific information about the adjustments. Don't be fobbed off by form letters, or generalities, or the poor attitude you can get from staff where you dare to question them.
2. Esc A19 looks good here on the face of it too.

omeuwen

Call the Income Tax Payment helpline and ask for an explanation, I have found them quite approachable in the past. If you want to proceed against them you should get the information in writing.

Mikeyorks

geofft1947 wrote: »

I'm totally baffled.

You need to look at the P800s with the Notes that were enclosed. Any under / over payment from 05/06 is carried forward to 06/07 and added / deducted from the tax due for that year. That is the 'adjustment' normally. And that is repeated with the new figure from 06/07 to 07/08. The final figure, on 07/08, at either Note 15 (underpaid) or Note 16 (overpaid) is the summary of all the years. As explained in the P800 Notes.

If it's 05/06 causing all the problems then post the figures from that P800. Also your P60 for that year (Pay / Tax / Code number). And someone will see if something stands out as the reason.

but at the end shows 'Other adjustments' which accounts for the underpayment.

...... my reading of that is that it refers to the underpayment for 05/06. Unless the P800 for 05/06 shows an underpayment brought forward. Which I doubt, if you haven't had earlier P800s.

geofft1947

Whoops!. I misunderstood these calculations.

The underpayment of £2700 in 2005 was carried forward to 2006 which resulted in a underpayment of £180 which in turn was carried over to 2007 which resulted in a final overpayment of £180. So instead of having to pay £2700 as I first thought, I actually now have received a cheque for £180!

I guess I should have read and understood the notes better!

Mikeyorks

geofft1947 wrote: »

I guess I should have read and understood the notes better!

Indeed! A cup of coffee with P800s always helps?

But the cover note should indicate there is a payable order on its way? Which is a giveaway?

Pet50

My husband has recently received a tax demand for the past 3 years whilst being retired and therefore not working. His only income is from his pensions. They seem incapable of working these out! They take different amounts of tax out of each pension every month! Why they can't add them together and deduct the same each month lord alone knows! No wonder they are in a mess.
Unfortunately common sense is not that common in these institutions.
However, not to be beaten by them I have found a link to some letter templates which might prove useful for people in similar positions to us.
I have knocked out one regarding PAYE and pensions and am posting tomorrow. Death by paper seems to be the way forward.
Good luck to you all!

http://www.guardian.co.uk/money/2010/sep/07/tax-error-letter-templates

jem16

Pet50 wrote: »

My husband has recently received a tax demand for the past 3 years whilst being retired and therefore not working. His only income is from his pensions. They seem incapable of working these out! They take different amounts of tax out of each pension every month! Why they can't add them together and deduct the same each month lord alone knows! No wonder they are in a mess.

Working out the correct tax from more than one income source is always going to be more difficult than one income source from one provider. Each has to have a separate tax code with the first source usually being given tha main tax code and subsequent sources being given a BR tax code. There is the added complication of the state pension being taxable but paid gross.

What is the problem in your case?

Unfortunately common sense is not that common in these institutions.
However, not to be beaten by them I have found a link to some letter templates which might prove useful for people in similar positions to us.
I have knocked out one regarding PAYE and pensions and am posting tomorrow. Death by paper seems to be the way forward.
Good luck to you all!

http://www.guardian.co.uk/money/2010/sep/07/tax-error-letter-templates

Why do you feel there has been an error?