HMRC nightmare tax underpayment

go4it

Can anyone help me with this as it is proving a nightmare.

Last year HMRC told me I had underpaid tax - they had messed up the tax codes. It was agreed I would repay back through PAYE over 2 years (about 1K).

Now I have had to file self assessment forms as for financial reasons I am now renting out my flat. HMRC then calculated that I owed 1K of tax, and were demanding it straight away. I told them about the PAYE code, and thought that would carry on.

Now they have sent me letters reissuing a new tax code, so the underpayment has been cancelled. No doubt they are now going to demand the full amount straight away.

On top of this, they are also trying to demand £700 of student loan payments through self assessment. This is because on PAYE I had 2 jobs, with student loan only getting collected by main employer.

Is it any wonder people fiddle the system and don't declare incomes when this is how HMRC treat you? I would have been better off not declaring the flat rental income (which I make a loss on every month). But as ever in this country the good people get penalised and the crooks get away with it ....

00ec25

go4it wrote: »

But as ever in this country the good people get penalised and the crooks get away with it ....

no consolation to you, but agreed!

Murdina

Unfortunately when you go into self assessment any PAYE underpayment gets swept into that.

That means in effect it does become payable in line with SA payment dates and interest and surcharges/late payment penalties run.

Until you are in self assessment bizarrely any repayment of PAYE is technically "voluntary". So if you did not have enough income to pay it back through your tax code the only way HMRC could legally enforce it would be to send out a tax return for the year and get it dealt with through self assessment.

As self assessment tax debt involves interest and in some cases surcharges and late payment penalties you are better off trying to avoid that.

In your case you were stuck because of the rental income.

However under new rules from last April you should be able to ask for any self assessment debt under 3k to be collected through your code.

I appreciate how annoying it all is but I don't think you are disagreeing you owe the money?

in_the_Cotswolds

I have the same problem, they have managed to mess up my tax codes for the last 5 years!!

Apparently I owe them nearly £4k plus interest. What annoys me is the fact they are charging me interest for their incompetence!!!

Murdina

But of course if you challenge it you are the one who should have been checking the tax codes assiduously.

I sometimes think HMRC actually expect the taxpayer to do the job for them. Nothing is ever their fault.

chrismac1

You are quite right Murdina. Even when their stupid database swapped one of my clients' records with someone who was living 200 miles away, far from an apology there were veiled accusations that somehow my mentally ill client was to blame.

One thing I advise all clients to ask when they get a letter from HMRC is:

"Where is the fukk-up in the letter?"

Not is there one, but where is it. Because it is a rare day when every letter I get from these jokers is free from errors. In many cases howling errors. This is especially true in situations where HMRC are going back several tax years and demanding a great big lump of tax from an unsuspecting victim.

In most tax offices an abacus is used to do these calculations. Now whilst in UK tax offices abacuses these days are pretty free from sand, doubtless the odd grain of coffee or smudge of ink gets in the way of the beads, and the quill pens in use are notorious for shedding feathers which can also stop the abacus beads from sliding accross properly.

So there are lots of valid reasons why they get their sums wrong so often, and anyone who accepts anything at face value from HMRC - especially a bill - is probabaly missing a trick.

System

go4it wrote: »

Can anyone help me with this as it is proving a nightmare.

Last year HMRC told me I had underpaid tax - they had messed up the tax codes. It was agreed I would repay back through PAYE over 2 years (about 1K).

Now I have had to file self assessment forms as for financial reasons I am now renting out my flat. HMRC then calculated that I owed 1K of tax, and were demanding it straight away. I told them about the PAYE code, and thought that would carry on.

Now they have sent me letters reissuing a new tax code, so the underpayment has been cancelled. No doubt they are now going to demand the full amount straight away.

On top of this, they are also trying to demand £700 of student loan payments through self assessment. This is because on PAYE I had 2 jobs, with student loan only getting collected by main employer.

Is it any wonder people fiddle the system and don't declare incomes when this is how HMRC treat you? I would have been better off not declaring the flat rental income (which I make a loss on every month). But as ever in this country the good people get penalised and the crooks get away with it ....

Hi go4it

Let's see if there's anything that might help....

First off, we need to be clear about the year(s) involved. Firstly, which year did the PAYE underpayment arise? You mention HMRC was already collecting the tax through your code (presumably your current 2012-13 code). Based on that I'd expect the PAYE underpayment to be 2010-11 or eariler.

You also mention that you are now renting your flat and are completing tax returns. Did you complete a return for the year of the PAYE underpayment? Also, and I know this might sound silly, but were the details in your return right? They can be tricky sometimes, especially if you have to make income based student loan repayments.