Underpayment of tax...repayment

devilchef

Hi all MSE's, i have a friend who has received a phone call saying she owes over £800 tax from last year as she hadn't paid enough. They told her on the phone to pay it even if it means getting an overdraft or get a credit card to put it on.
I understand although this may be wrong that if you underpay tax, HMRC will adjust your tax code to increase your tax and repay that way not demand it over the phone etc, is this correct and where does she stand,
cheers

Pennywise

Was this the first contact from HMRC?

HMRC would never telephone someone to tell them they owed tax out of the blue.

Are you sure it's not from the HMRC debt collectors trying to chase payment of tax which your friend would have been written to about a few times?

Are you getting the full story from them?

JulieM

This doesn't sound right to me either.

Did she submit a tax return for the year in question? Towards the end of the return form there's a box you should tick only if you DON'T want tax deducted through PAYE, is it possible she ticked this by mistake? I find this part of the return a bit confusing.

Even if this is the case, she should have received a letter from HMRC first, I've never heard of them phoning up out of the blue.

PlutoinCapricorn

It is best to start by working out the tax due/paid for the year 2011/2012 to see if there actually is an underpayment.

If there was, the next step is to see how it could have happened.

People on here can help with these steps if given more information.

Has the address changed? It is important to ensure that HMRC has the current address, as ignoring or missing the letters they send is the worst thing you can do.

Linton

Sounds like it could be a scam. HMRC would put tax demands in writing. Did the phone call say how to pay? The bit about putting the debt on a credit card sounds highly dodgy, especially if they then offer to take the details over the phone.

Suggest friend rings HMRC to confirm the phone call. I have always found their call centre very helpful.

devilchef

Hi, as far i know from what she has told me, she has had a letter in the post before. She is self employed and has an accountant who usually deals with those things. She told me that she owed over £800 and she is more than willing to repay it was more to-do with the fact that they phoned up quite obnoxiously and demanded it there and then even if it meant she had to take out a credit card or put it on an overdraft or take out a loan. This sounded alarm bells to me and didn't sound right to me. As far as i know it was part of a self assessment although this means nothing to me but may mean something to you guys. Are there certain procedures the HMRC has to follow and is this method..if it is them ..legal?
Sorry about delays answering , this is due to work shifts but will repsond, cheers

dori2o

devilchef wrote: »

Hi, as far i know from what she has told me, she has had a letter in the post before. She is self employed and has an accountant who usually deals with those things. She told me that she owed over £800 and she is more than willing to repay it was more to-do with the fact that they phoned up quite obnoxiously and demanded it there and then even if it meant she had to take out a credit card or put it on an overdraft or take out a loan. This sounded alarm bells to me and didn't sound right to me. As far as i know it was part of a self assessment although this means nothing to me but may mean something to you guys. Are there certain procedures the HMRC has to follow and is this method..if it is them ..legal?
Sorry about delays answering , this is due to work shifts but will repsond, cheers

Yes there are, and yes it is.

Assuming that this underpayment is from the tax year 2010/2011, then the balance has been outstanding for 10 months

Tax due for the tax year ending April 5th 2011 was due for payment on or before 31 January 2012.

As the balance is over £500 HMRC will have been issuing monthly statements, they will also be adding interest and penalties onto the balance.

HMRC have the ability to pass the debt onto a DCA (Debt Collection Agency), it may be them that have phoned, although the Debt Management team also make calls to debtors to try and arrange repayment of the outstanding balance. HMRC will ask that if there are no funds to immediately pay, the taxpayer tried to fund the payment of the balance by way of a loan or a credit card. If these are not available then HMRC can make an agreement to pay the balance over a period of time, although it has to be acceptable, they won't for instance accept 50p a week for 30 years, even if that is all they can afford, they'll simply take further distraint action which could be as severe as bankruptcy. They can also get a CCJ and then enforce it by way of a bailiff entering your home and taking goods to the value of the debt. Thy will look for the taxpayer top come up with an arrangement to clear the balance asap.

I would advise your friend to speak to HMRC asap and arrange a time to pay agreement with them, or if possible pay the balance.

PlutoinCapricorn

To repeat, ignoring letters from HMRC is the worst thing you can do, and this unpleasant phonecall shows why.

The accountant should have reminded her too.

devilchef

Thanks for your help, i will tell her tomorrow what you have said, i should say that i don't think that she deliberately ignored any letters from HMRC and the letter sent, was very recent, she was a little shocked of how she was confronted by whoever. Her accountant as far as i am aware, never told her that she underpaid tax and only found out in the letter sent to her.
Thanks all.
Devilchef

chrismac1

I have the following tips for dealing with HMRC calls like this:

1. First, ask them to identify themselves. Full name, postcode of tax office they are caling from, date of birth, eye colour. After all, when you call HMRC you first spend 5 minutes minimum listening to inane drivel then get asked all this, and if you get passed around which often happens you have the whole
thing to go through again.

2. Next politely point out that your accountant has told you that various Tribunal judges on various taxes have rapped HMRC knuckles for pressurising people into taking on expensive debt to pay off HMRC debts.

3. Then make them an offer you can afford. They will normally decline even reasonable offers out of hand. Nay matter.

4. You now end the call. Then write to the specific person at the specific tax office and post code, summarising the call and any offers made. THIS WORKS! You have now put that person's azss on the line, they hate that and much prefer to be the faceless HMRC apparachik who can shoulder off any responsibility to take any positive actions whatsoever.

System

OP, your friend would be far better advised to play it straight with HMRC. As dori2o says they have several legal powers when it comes to SA debt.

Here's the contact details for their payments helpline. It's there for people experiencing payment difficulties and need more time to pay.

I hope your friend gets things sorted.

http://search2.hmrc.gov.uk/kb5/hmrc/contactus/view.page?record=6R6F-jCXllU