HM Revenue & Customs (HMRC) are sending letters to millions of tax payers informing them that they have paid too little or too much income tax. They claim that these errors have been discovered following the introduction of a new computer system for Pay as You Earn (PAYE) tax and the letters will be issued over a number of months.
Taxpayers due a rebate will receive a cheque while those who have underpaid will, in most instances, have their tax code for 2011/12 lowered to collect the underpayment via the salary or pension income. In some cases individuals may face both underpayments and overpayments, which could cancel one another out.
The average underpayment is thought to be over £1400. A reduction in net pay of £100 or more each month, while this underpayment is clawed back, could cause problems for many people.
HMRC claim that their new system is more efficient and has allowed them to identify these errors. They say that most of the errors occur where there has been a change in circumstances throughout the year such as a new job or pension. However
HMRC’s faith in their new system may be misplaced. The system now handles the issue of coding notices and errors in these are commonplace.
If you receive one of these letters you should check it carefully to make sure the adjustments are correct. HMRC have got it wrong in the past and with such a massive exercise there are bound to be some errors.
HMRC will consider writing off demands where taxpayers can demonstrate that they provided all the information necessary to calculate their tax correctly. Alternatively sums owed could be written off in cases of hardship or the repayment terms could be renegotiated to give more time to pay.
If you are unsure whether the letter is correct or if you would like some further advice you should contact us as soon as possible after you receive the letter and we would be pleased to help.
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