HOW TO DEAL WITH A TAX DEMAND (05/10/10)

What should you do if HM Revenue & Customs ask for more tax as a result of a coding error?

The issue of incorrect tax codes and tax demands has been in the press over the last month or so and we have previously discussed the problems on our website (click here).

The scale of the problems with tax codes has gradually emerged over recent weeks and HMRC is now working through millions of cases to identify where there tax is under or overpaid.  It is estimated that 6 million tax payers will be written to over the next few months with a calculation of any tax due.

It is anticipated that the majority of cases will involve some form of tax refund – obviously good news for the tax payers concerned. 

However it is expected that some 1.4 million cases will mean that the tax payer receives a demand for additional tax and in some cases the amount due could be more than £2,000.

Here we look at what to consider if you do receive a demand for additional tax over the next few months:

 
    •    The first action should be to check, in detail, any calculation you receive from HMRC. There is no guarantee that any updated calculations are correct and tax payers should review these in detail.

    •    If the calculation is correct then there may be scope to ask HMRC to write off the tax due. This may apply if HMRC were in receipt of the correct information but failed to use this then HMRC may write off the tax due. This concession comes from an obscure piece of HMRC guidance – ESC A19

    •    Finally if HMRC will not write off the tax due and paying the additional amount will cause financial hardship then you should contact HMRC and negotiate to pay this over a longer period. In light of the publicity surrounding this issue HMRC have promised to look favourably on such requests.

HMRC has also published its own guidance on this subject which can be found here.

• If you would like any further assistance with this or any other taxation matters please contact tax@burgesshodgson.co.uk