Insights

RJP's tips for dealing with notifications of incorrect tax paid:

• Any challenges to tax underpayment will be carefully scrutinised
• Reimbursements for tax overpayments are payable as lump sum
• Beware of phishing scams, HMRC never use email to notify or refund taxpayers.

With Surrey taxpayers contributing around £5.5 billion each year to the Treasury, as many as 1 in 3 Surrey taxpayers could be getting a letter from HMRC telling them that they have paid the wrong amount of tax. In some cases, because of the tendency towards higher than national average incomes within the county, the outstanding amount payable could be up to £2,000 according to BBC reports.

We are advising people who are on the receiving end of these letters to think carefully about whether they are able to challenge requests for additional payments.

It may be possible to argue the case for not having to repay any underpayments. This could be possible for instance, if you think that HMRC should have already collected the tax due, because the information to enable them to do so had already been provided to them.  If HMRC have failed or delayed to use this information within a certain timeframe, then in some limited circumstances they may agree not to collect it.

HMRC is simultaneously trying to recover £2bn that was underpaid in the past two tax years, and to repay £1.8bn that was overpaid – all mistakes which have been revealed following the introduction of a new IT system which highlighted the discrepancies.

It is possible for taxpayers to challenge underpayment requests by applying an ‘Extra Statutory Concession’ (ESC A19) as grounds for an appeal.  According to ESC A19, the right to challenge exists in cases where HMRC should have used information submitted to calculate any tax shortfalls within 12 months after the end of the tax year in which it is received. However during Prime Minister’s question time today, it was announced that true hardship cases would be treated very sympathetically and any appeals would be carefully scrutinized by the Inland Revenue.

It could be difficult for a taxpayer who has submitted a self assessment to successfully challenge HMRC because they would have been aware of their correct tax position. We suggest that you consider very carefully whether you are able to make a claim, and that you take advice, because HMRC are likely to scrutinise claims carefully.  You can talk to a Chartered Tax Advisor for advice and notify the tax office if you see any obvious coding errors.

There are some individuals who may be notified that they have overpaid tax. In this case there are two things to watch out for – firstly that any overpayment due to you should be repaid outright and not repaid over a period of time by inclusion in your notice of coding; and secondly to be aware that HMRC NEVER notify overpayments by e-mail. Any notifications received by e-mail should be treated as fraudulent and you should never provide your bank account details in response to such communications.

Organizations such as TaxAid or the local Citizens Advice Bureau could also help with initial enquiries.