Insights

HRMC has been experiencing a lot of problems in recent months as we all know, with incorrect coding notices being the most high profile.  Due to a mixture of computer and personnel errors, the blunders continue and we face them all the time in our daily dealings with individual Revenue advisors.  In some cases the mistakes are so nonsensical, they are actually rather comical, although for the individual taxpayer facing a lengthy tax re-claim, perhaps not.
For example when Tax Talk recently called one office on behalf of a client to discuss their case, we were told it would be a 106-day wait for a call back!  In another instance, we were calling an office repeatedly to have the phone ringing unanswered for a whole day.  When we finally got through – to confirm a letter had been received and would be acted upon – we learned that the office had been unmanned on that particular day because of staff shortages. Isn’t that why we have answer machines - though I suppose they are a bit old fashioned nowadays?
Post sent from Revenue offices regularly takes up to 3 weeks to arrive – recently post date stamped  18th January in HMRC offices reached us on 14th February. This seems to indicate there is not only a delay in dealing with post, but in actually getting it out of the door!
On the whole, HMRC are slower that we would like them to be when following up on penalty appeals.  When you do speak with an officer they are polite and helpful to the best of their ability, but it is frequently obvious the data they have to work with is terribly inaccurate, caused by delays in capturing new taxpayer information when their details change.  One case we undertook recently took 10 months to resolve but our record is a year, which resulted in compensation for the client due to the continual mistakes made by HMRC and the resulting delays.
Humour aside, for the many thousands of people affected by incorrect tax codes, wrongly targeted penalties or the inconvenience of administrative mistakes, this is not really acceptable and we should be able to expect a better organised and managed system.

Our ‘top 10 HMRC tax mistakes to watch out for’
1. Removal of personal allowances (£6,475 for people under 65, £9,490 for people aged 65 to 74 or £9,640 for people 75 or above).  Look out for a BR code on your tax coding notice.
2. Wrong tax code which either means tax free allowances are removed, reduced, or the tax rate is incorrect.  We have experienced cases where basic rate taxpayers were taxed at 40%.
3. Even more expensive for the taxpayer is adding a 1 to the expected salary to increase tax levels to the 50% (or 60%) rate.  Check you do not have a BR, DO or K tax code.
4. Estimated bank interest included in the coding so that the tax is paid monthly in advance rather than on the due dates. You do not have to accept this, but frequently it is overlooked.
5. Failing to properly update previous employer information resulting in tax rates applicable to far higher salary than is accurate, or allocating a tax code which relates to a very old employment position.
6. Late filing payments issued for a corporation tax return (CT600) when the year end has been changed for tax planning purposes; HMRC properly notified and the corporation tax return paperwork submitted on time.
7. Factually incorrect letters relating to a whole range of fictional information  from companies ceasing to trade and having shut down their payroll systems, confirmation of corporation tax being paid when it would have been PAYE, or notifications resulting from the taxpayer’s details being duplicated or wrongly recorded.
8. Out of date or missing company car and benefit in kind information results in employees being taxed too much or too little.  Check your coding letter to ensure any perks – car, petrol allowance or medical insurance are included and that any deductions for assumed income from savings are accurate.
9. Lack of extra allowances advised in addition to the annual allowance for professional subscription fees, pension contributions and any regular charitable donations.
10. For pensioners able to claim the £700 married couples allowance, the removal of the allowance.  You would be eligible to receive this because you are married and either your husband or wife was born before April 6th 1935.  It would be on one partner’s coding notice.
11. Also for pensioners is the incorrect attribution of tax codes across different pension schemes.  Typically the tax code needs to be split across a number of schemes to ensure you do not incur too much tax on one pension.  Getting this wrong could mean a pensioner does not effectively use their tax free allowance and could pay almost £400 more in tax unnecessarily.