You cannot have failed to notice the recent publicity surrounding the PAYE over and under payment chaos, but how will it affect you and what should you do if you are subject to a significant underpayment claim from HM Revenue & Customs (HMRC)?
Dominic Bourquin, Tax Partner at Swindon based Monahans Chartered Accountants commented that “All is not lost where you have received an unexpected and significant under payment claim for PAYE from HMRC. Where the under payment is less than £300 HMRC are unlikely to contact the taxpayer and they should write off the balance, so the taxpayer is unlikely to know they have actually underpaid and the under payment should not be collected.
Where the balance is more significant, it is likely to be adjusted through the PAYE coding notice of the taxpayer, meaning that less tax free allowances are available in the current year to offset against taxable income. In these circumstances, the taxpayer will pay more PAYE to make up the shortfall for prior years. However, there is action that can be taken.
This issue has arisen due to a new HMRC computer system that now automatically calculates the year end payments that were previously done manually. These year end reconciliations have not been performed for the past two years, so HMRC is now undertaking the reconciliations for two years instead of one, hence the potentially larger amounts of PAYE falling due.
HMRC do operate a concession that where they have received the correct information from the taxpayer, but have failed to make proper use of it within twelve months they will voluntarily forgo the tax. It is this concession that may allow some taxpayers, despite there being a significant amount of tax due, to not pay the amounts requested via their revised coding notices. It is critical that taxpayers contact their advisors and agents to ensure that any advantage that can be claimed under this concession is obtained, particularly as not all the documentation will be sent to agents by HMRC as is the norm.”
Call Dominic on 01793 818300 for a no obligation discussion if you are unclear how this issue may affect you.
