Many taxpayers (and therefore businesses) in the UK who pay tax via the Pay As You Earn (PAYE) are like people caught in the shadow of a volcano that is about to erupt, awaiting their fate and the chance that they may be affected by the downfall of volcanic ash, or in this case 1.4million brown envelopes bringing unwanted tax demands.
As HM Revenue & Customs (HMRC) come to terms with their departments failings over the last two years and look to collect millions in unpaid tax, the nation can only wait in dread to see if they will be affected.
Those more likely to receive demands are people with more than one source of earnings or pension and employees who receive benefits such as company cars. It is therefore important for businesses to understand the situation and work with HMRC to try and rectify any situation relating to one of their employees.
The problem has arisen in part due to HMRC having various computerised systems that could not collate the information into one central record. This has lead to incorrect PAYE coding notices resulting in the underpayments of tax, or in some case overpayments.
If you are one of those who does receive a demand there is little to do to avoid payment if it is correct. Firstly, as a business, you will need to consider if you have supplied all the relevant information to HMRC and within the correct time limits to enable them to assess your tax liability and issue correct notices of coding.
If you have done this then you may be able to claim that HMRC have made an “official error” in not using the appropriate information that had been supplied to them in a timely fashion. Extra Statutory Concession A19, until the last week a little known ‘loop hole’, entitles you to request HMRC to remit 100% of the tax debt if you can prove they have failed to use information provided in an appropriate and timely fashion.
Businesses who receive a demand and feel they are able to challenge need to prepare a template letter to send to HMRC. This can be found by following the attached link.
However be warned, HMRC’s spokesmen have stated this week that they will vigorously challenge any claims under ESC A19 and will only concede to those that meet the full requirement of the concession.
It would appear that a battle lies ahead for many taxpayers who innocently believed they had already paid their “dues” to the taxman via the PAYE system. Many businesses feel that this will not be the end of problems facing HMRC or the tax paying public with the potential for future revelations very much a possibility!
TaxWise is available to help answer any tax queries. Just call the Advice Service on 01455 852555 and one of our specialists will be happy to help.
Tax Demands Relating To PAYE
September 24 2010