How to deal with those tax error letters plus 5 template response letters
HM Revenue and Customs (HMRC) have just begun the first wave of a three month process informing 6 million tax payers that they have paid the wrong tax.
The first batch of 45,000 letters hitting the doormat this week will go to some of those 4.3 million tax payers, who are due a rebate averaging £420 each and to some of those 1.8 million tax payers who have underpaid, on average by £1,400.
Why the letters?
The tax payment problem arose a while ago when HMRC merged 20 computer systems into one which resulted in some old data being read as being current. Subsequently people’s tax codes were incorrect which affected the amount of tax they paid each month, too much or not enough.
The computer system now shows that HMRC is owed £2bn through errors from underpaid tax over the past two tax years, but it also revealed that it was overpaid by 1.8bn.
Some have argued that there should be no action on either fronts whilst others question why people should overpay their tax at the expense of those that have underpaid, so the HMRC see that a letter to all those involved is the only way of resolving the issue.
Is the letter a tax demand?
No, it is a tax calculation, the HMRC’s estimate of the tax payer’s tax position. The letter is purely information from HMRC of what they think is your correct tax code and whether they owe you or you owe them money. Do not panic and confuse this with a tax demand.
What do I do if I receive a letter saying I owe them money?
Make sure the information in the letter is correct and read the form P800 and guidance notes. For example it may state you have more than one job when you don’t or that you have a company car when you don’t. The form may also not detail any tax relief you are entitled to so you may be able to identify mistakes straightaway.
Another area to look at is your employer as they may be to blame for not using your personal tax code correctly and deducting the wrong amount of tax from your pay. If so take the issue up with them.
Can I ask for the debt to be written off?
It is possible under certain circumstances. You will need to see if the letter is out of date and if the revenue has delayed more than a year in informing you about any tax shortfall then you can ask to have the debt written off.
This will only apply if, when you open the letter, you find that the underpaid tax relates to the 2008-2009 tax year, (more than 12 months old) and importantly that you are satisfied that you provided the tax office with all the information they needed at the time. If so and they failed to act upon it then you can request an Extra-Statutory Concession A19 that the debt be written off.
How do I check my tax code?
You can check your tax code at www.hmrc.gov.uk/incometax.
You can also use an on-line calculator at www.listentotaxman.com to ensure your net pay is right for your circumstances.
My tax code is wrong, what is the best way to contact HMRC?
You can contact HMRC on 0845 3000 627 but be aware they are likely to be extremely busy as a result of this current issue. More contact details will be on your letter and form P800. It may be best to write, clearly stating your reasons for your grievance and the tax year concerned, 2008-2009 or 2009 -2010. Make sure you send the letter and any supporting documentation recorded delivery to prove postage and keep a copy of everything.
What if I genuinely cannot afford to repay the debt?
There is the possibility that HMRC will put pressure on you to pay back all the tax immediately. If this happens you should put in counter-proposals, for example, refusing the new tax code and making alternative arrangements to pay by cash instalments over a period that you can manage. Always remember that any under payment is not your fault, it was caused by HMRC.
Can I appeal against my calculation?
If after submitting an A19 concession it is rejected then you can go to a free appeal service run by The Adjudicator’s Office which is seen as a fair and unbiased complaints intermediary for HMRC grievances.
What happens if I am due a rebate or accept I owe money?
Anyone due a rebate will receive cheque within 7 – 10 days of receiving the first letter; this will include 0.5% interest!
If you are one of the unlucky ones that owes money then provided this is below £2,000 you will receive a new tax code early next year. This new code will come into force in April and will be deducted from your pay or pension over 12 months, or three years in cases of hardship.
If the amount you owe is above £2,000 then HMRC will write to you and ask for direct payment. If you cannot afford to repay this then you need to contact them and explain this, this will stop any interest being added. If you fail to make contact and not make the payment then you will be charged interest.
Small underpayments of tax
The minister in charge of the tax system, Mr David Gauke MP, has said that HMRC would not seek to recover small sums of less than £300.
Those in receipt of benefits
This is another issue that has not been resolved as hose on very low incomes may have been entitled to higher benefits, denied them through inaccurate tax coding. There is no right to claim back dated benefits.
Scam emails
All your communication from HMRC will be by letter, they will not send you an email. If you receive an email promising a refund and requiring your bank details, DO NOT open it, it will be a scam and the same applies to any telephone calls from HMRC requesting bank details. Remember, by post only!
Most importantly, if you receive a letter regarding overpayment, don’t ignore it, do something about it as the HMRC do not go away!
See more on scam email addresses
We have the following template letters for you if you need an idea on what to write and how to present your case;
- Claiming Extra-Statutory Concession A19 (step 2)
- Employer/pension payer error (step 3)
- Requesting adjustments (step 4)
- Explanation request (step 5)
- Complaint
Go to tax error template letters
