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HMRC tax mistake letters start to arrive

The first of some six million letters to taxpayers are starting to arrive. Some taxpayers will be pleasantly surprised when they discover they are due a rebate having paid too much tax, but for many others the letter will be less welcome.

HM Revenue & Customs is simultaneously trying to recover £2bn that was underpaid in the past two tax years, and to repay £1.8bn that was overpaid. An average of £1,380 in extra tax charges will be sought by the Revenue, and this will be collected in the next tax year by a change in tax code, the equivalent to a deduction in pay packets and pensions of just over £110 per month, just as other tax squeezes take effect.  In cases where the amount due is more than £2,000 the Revenue may ask for a lump sum payment. Many of those affected are likely to be unrepresented taxpayers who are not used to dealing with HMRC.

Anyone receiving a letter from HMRC should not panic.  The letter will include a form (called P800) which will show your tax calculations.  The first step is to review it.  You may wish to do this yourself or with help from an accountant.  If you agree with the calculations there is nothing further for you to do.   The tax due will be taken automatically over the next tax year.

If additional tax is due and it is likely to cause ‘unreasonable hardship’ it is possible to ask HMRC to spread the repayments over a longer period of time.  To do this you will need to contact your local tax office.

If you do not agree with the calculations you will again need to contact your local tax office, the details of which will be included on the letter.

However, if you believe that you provided HMRC with all the necessary information to enable it to get your tax code right it might be possible to contest the demand, under rules called an Extra Statutory Concession.  To be successful you will need to be able to demonstrate that it was the fault of HMRC and that its claim for unpaid tax falls outside of the time limit specified.  HMRC has warned that claims are unlikely to succeed, but if a demand is received the terms of the concession should be examined.

For more information please contact Alex Astley by email: