HMRC demand £2,000 underpaid PAYE tax from the most vulnerable!

elaine@cheapaccounting · Nov 1, 2010

The letters have started to fall onto the door mats of those that HMRC have calculated have underpaid tax, even though the tax payer believes that they have paid the correct PAYE.

Mrs Pearn is one person who has received such a letter.

HMRC say that she owes them nearly £2,000.

The problem is that Mrs Pearn is under the care of a consultant at a Mental Health Unit after being retired some years ago on mental health grounds, due to severe depression along with a catalogue of other problems, including the death of a child which affected her badly and still does.

She is in no position to understand or deal with this because of her illness.

Her husband Richard has been in touch with the PAYE Help Group set up by Elaine Clark, Managing Director of CheapAccounting.co.uk.

Elaine says:

This is a terrible case. Mrs Pearn receives incapacity benefit as well as an NHS pension. HMRC were informed of the two sources of income by the Benefits Agency and the NHS but did not act on the information provided. So the problem has gone on for a number of years.

As a result Mrs Pearn has received a demand for nearly £2,000. Money which she does not have.

We have sent HMRC what is called an Extra Statutory Concession appeal (ESC) A19. We believe that HMRC did not use the information provided to them and the delay has resulted in the underpayment.

They should have collected the tax at the time and their failure to do so should mean that they can agree not to demand the £2,000 repaid.

The problem is that there are over 1.4 million of such cases and whilst this Extra Statutory Concession can be applied by HMRC, they seem to be rejecting all such claims by issuing a computer generated letter in less than a week of the claim being made. Surely it would take HMRC more than a week to review the individual circumstances of anyone? They are clearly not even reading the details.

Unfortunately I do not think that Mr and Mrs Pearn are alone in this situation. I believe that it is people exactly like them that are receiving such demands and do not know what to do about them. People who are not used to dealing with HMRC or will not have an accountant because they believe that their tax is correctly being paid through the PAYE system.

Mr Pearn says that:

I just dont understand why this is our fault. Surely the various Government computer systems should have talked to each other. This will cause us severe hardship as we are both disabled, especially in the run up to Christmas.

The tax office in Cardiff said we would have to pay it back regardless of any hardship we will face which I thought was a bit unsympathetic of them. They have said to me that they will be adding daily interest because I have caused a dispute and will now not give me extra time to pay it back .

Elaine concludes:

We will continue to appeal this case and take this as far as we can within HMRC. I just hope that common sense is applied at some point and such cases are not pursued!

------------------------------- end

Notes to the Editor
To find out more, call Elaine Clark on 0844 884 2399 or mail on [email protected]

The PAYE Group is a group of volunteer qualified accountants established to help those on low incomes affected by the 2010 PAYE underpayments fiasco.

The group aims to provide a tax calculation check as well as general advice and guidance regarding how to handle the HMRC demand for the underpaid tax.

The group, set up by Elaine Clark, Managing Director of CheapAccounting.co.uk, is made up of accountants who are regular contributors to UK Business Forums where they provide free accounts and tax advice.

UK Business Forums have lent their support to this initiative by providing a dedicated forum for those affected by this issue.

Elaine says:

My view is that the people hit hardest by these demands for underpaid tax will be those who think they have done nothing wrong as their tax is collected via the pay as you earn (PAYE) system.

In all likelihood these people will never have received a letter from HMRC and the demand will be a great worry.

I want to offer them a place to get advice and help on this matter and through the UK Business Forums we are able to do just that.

More information can be found at:

http://www.ukbusinessforums.co.uk/forums/forumdisplay.php?f=122

maxine · Nov 1, 2010

Without the ins and outs of the actual PAYE calculation itself, there must be some legislation for debtors in distress that HMRC must have to adhere to, so as to not humiliate or embarrass or pressure a debtor in distress and give fair and reasonable treatment for payments.

It's got me thinking anyway.

Are there any consumer credit bods on here that are aware of things that could help.

I was initially thinking Administration of Justices Act but the debts might be a bit early to be covered by that?

robertt · Nov 1, 2010

I dont understand how people can not realise their tax rates and what they pay - or ought to be paying.

Likewise for spending an extra £2k that was not theirs to spend...

Harsh I know, however the situation without the added circumstances is that they underpaid £2000 in tax, and evidently spent it.

elaine@cheapaccounting · Nov 1, 2010

Thanks Max - great idea.

I am talking to 'The Press' at the moment - so may get some real momentum behind this very soon (fingers crossed)

elaine@cheapaccounting · Nov 1, 2010

robertt said:
I dont understand how people can not realise their tax rates and what they pay - or ought to be paying.

Likewise for spending an extra £2k that was not theirs to spend...

Harsh I know, however the situation without the added circumstances is that they underpaid £2000 in tax, and evidently spent it.

bloody harsh - no apologies for the swear word.

I do hope that you never find yourself suffering from mental illness.

I cannot believe your attitude on this. Have to read the story - too annoyed to say any more.

Nov 1, 2010

robertt said:
I dont understand how people can not realise their tax rates and what they pay - or ought to be paying.

Likewise for spending an extra £2k that was not theirs to spend...

You have to be kidding .

I can't understand me gas bill.

Earl

stugster · Nov 1, 2010

robertt said:
I dont understand how people can not realise their tax rates and what they pay - or ought to be paying.

Likewise for spending an extra £2k that was not theirs to spend...

Harsh I know, however the situation without the added circumstances is that they underpaid £2000 in tax, and evidently spent it.

Are you having a laugh?

robertt · Nov 1, 2010

elainec100@cheapaccounting said:
bloody harsh - no apologies for the swear word.

I do hope that you never find yourself suffering from mental illness.

I cannot your attitude on this. Have to read the story - too annoyed to say any more.

My point was take away the circumstances the issue is:

- underpayment of due tax
- spending of that balance

As for "They should have collected the tax at the time and their failure to do so should mean that they can agree not to demand the £2,000 repaid. "

If that applies to all tax not collected at the time, or any tax errors surely the tax lost out on will mean less reciepts and could have direct impact on spending - in turn more vulnerable people lose out.

Perhaps I spend too much time counting the pennies and understanding what I pay and to whom.

As for gas bills... check them, I have been helping someone recently who was paying a different supply for 12 months! After a £277 refund as I type

elaine@cheapaccounting · Nov 1, 2010

And my point is that you CANNOT take away the circs.

Life is not black and white

elaine@cheapaccounting · Nov 1, 2010

robertt said:
As for "They should have collected the tax at the time and their failure to do so should mean that they can agree not to demand the £2,000 repaid. "

Obviously you are not a qualified accountant and do not know the law on ESC.

Go do some reading

robertt · Nov 1, 2010

I realise that.

Where do you draw the line, or is it assessed case by case?

I know someone who currently takes lithium due to major personal issues yet just about holds down a job. Should that person get tax breaks?

elaine@cheapaccounting · Nov 1, 2010

robertt said:
I realise that.

Where do you draw the line, or is it assessed case by case?

I know someone who currently takes lithium due to major personal issues yet just about holds down a job. Should that person get tax breaks?

What would you suggest. :|:|:|

A saying comes to mind ...

"You need to walk a mile in someone else's shoes ......

robertt · Nov 1, 2010

elainec100@cheapaccounting said:
Obviously you are not a qualified accountant and do not know the law on ESC.

Go do some reading

I am aware of what you mean, and I wish you good luck with the appeal however by reading the above it seems it has been refused already.

If you believe you are in the right keep at it - even go for judicial review on it.

My point was a wider one, that if the PAYE cock up is mitigated on all costs of collection of this due tax rises and less is collected - and less tax reciepts (currently) seem to mean less spending.

elaine@cheapaccounting · Nov 1, 2010

I very much look forward to telling you that we have won when we do!

If you look at the big picture on this - 1.4 million owe tax, over 4 million get a refund!

The amount being re-paid plus admin costs of the fiasco already exceed the amount being reclaimed.

So less to spend anyway!

spencergate · Nov 1, 2010

robertt said:
I dont understand how people can not realise their tax rates and what they pay - or ought to be paying.

Likewise for spending an extra £2k that was not theirs to spend...

Harsh I know, however the situation without the added circumstances is that they underpaid £2000 in tax, and evidently spent it.

When I was an 'ordinary employee' I never truly got the hang of what the tax codes meant, or why I had the code I had. Along with most of my peers, I received a coding notice, glanced at it, and left my employers payroll department to deduct the appropriate amounts. Bear in mind, I was a well educated graduate (business studies), in a Career, supposedly more able than most to understand such things. But I concentrated on the job I was doing to earn the money that they were taxing, which is what most folk do.

It wasn't until I became self-employed, then formed a ltd company that I understood how tax codes were formulated, and how to challenge them.

I still recall receiving a tax refund of £4K some 7 or 8 years ago. I didn't know why I had received it. My accountant didn't know why I'd received it, and the tax office couldn't tell me why I'd received it, altho they suggested I asked my accountants to do a complete calculation for the last 5 years (yep, at my expense, we didn't bother).

I shoved it in premium bonds, so it would be there when they asked for it back ! It won me the odd £50 along the way, and I guess it's mine now !!

Elaine, this situation is DIRE

Tom McClelland · Nov 1, 2010

robertt said:
I dont understand how people can not realise their tax rates and what they pay - or ought to be paying.

Likewise for spending an extra £2k that was not theirs to spend...

Harsh I know, however the situation without the added circumstances is that they underpaid £2000 in tax, and evidently spent it.

Most people have zero comprehension of how the tax system works. Particularly when they're getting taxes deducted from source by government bodies paying money to them they expect it to be got right. In this case the £2000 appears to be an accumulated error, resulting from several years of HMRC ignoring multiple income sources for a taxpayer. How on earth did HMRC not pick this up straight away at the end of the first year where there was a problem? I'm assuming that these people aren't an SA case so it should be trivial for HMRC computers to spot the overall tax underpayment. At a guess not all of the government "employers" (eg benefit money) have actually been subject to the same filing regime that the rest of us have to adhere to (WHY NOT.

) so HMRC never got to properly see all the income sources until now.

elaine@cheapaccounting · Nov 1, 2010

spencergate said:
When I was an 'ordinary employee' I never truly got the hang of what the tax codes meant, or why I had the code I had. Along with most of my peers, I received a coding notice, glanced at it, and left my employers payroll department to deduct the appropriate amounts. Bear in mind, I was a well educated graduate (business studies), in a Career, supposedly more able than most to understand such things. But I concentrated on the job I was doing to earn the money that they were taxing, which is what most folk do.

It wasn't until I became self-employed, then formed a ltd company that I understood how tax codes were formulated, and how to challenge them.

I still recall receiving a tax refund of £4K some 7 or 8 years ago. I didn't know why I had received it. My accountant didn't know why I'd received it, and the tax office couldn't tell me why I'd received it, altho they suggested I asked my accountants to do a complete calculation for the last 5 years (yep, at my expense, we didn't bother).

I shoved it in premium bonds, so it would be there when they asked for it back ! It won me the odd £50 along the way, and I guess it's mine now !!

Elaine, this situation is DIRE

Tom McClelland said:
Most people have zero comprehension of how the tax system works. Particularly when they're getting taxes deducted from source by government bodies paying money to them they expect it to be got right. In this case the £2000 appears to be an accumulated error, resulting from several years of HMRC ignoring multiple income sources for a taxpayer. How on earth did HMRC not pick this up straight away at the end of the first year where there was a problem? I'm assuming that these people aren't an SA case so it should be trivial for HMRC computers to spot the overall tax underpayment. At a guess not all of the government "employers" (eg benefit money) have actually been subject to the same filing regime that the rest of us have to adhere to (WHY NOT. ) so HMRC never got to properly see all the income sources until now.

Great to see some understanding on here.

How many people would know how to calculate their tax home page - especially if they had more than one job or source of income. :|

Unless everyone self assesses

eek:

) or HMRC got a good system these errors will continue.

With a society in which people regularly change jobs, have several income sources etc - this will get worse and will continue.

Tom - just for info the income sources were reported to HMRC (Mr Pearn has P60s).

Full facts too detailed / complex for here but needless to say (and anyone that knows will will appreciate this) the full facts have been examined and this is a case where the ESC should be applied.

I will keep you all updated but we are not letting this one rest.

Tom McClelland · Nov 1, 2010

elainec100@cheapaccounting said:
Tom - just for info the income sources were reported to HMRC (Mr Pearn has P60s).

Just because a P60 was produced for the employee it doesn't follow that HMRC ever got a P14 into their main system for those payments. My understanding is that the reason why some of these long standing problems are only now coming to light is because bodies like the organisations that pay public sector pensions and state benefits have only just started in the last couple of years to be included in P35/P14 filing requirements. Either that or their P35/P14s were being filed in a completely different system by HMRC from the ones that most employers use and the multiple systems weren't being correlated.

But I could have got hold of completely the wrong end of the stick. A big problem surrounding all of this is that no-one outside HMRC really knows what is going on inside that body.

elaine@cheapaccounting · Nov 1, 2010

That is scary as that means more of these to come.

I was going to say it makes sense but will change that to - it explain things.

spencergate · Nov 1, 2010

Tom McClelland said:
Just because a P60 was produced for the employee it doesn't follow that HMRC ever got a P14 into their main system for those payments. My understanding is that the reason why some of these long standing problems are only now coming to light is because bodies like the organisations that pay public sector pensions and state benefits have only just started in the last couple of years to be included in P35/P14 filing requirements. Either that or their P35/P14s were being filed in a completely different system by HMRC from the ones that most employers use and the multiple systems weren't being correlated.

Hells teeth, if we ran our operations in that way and used it as an excuse for getting our calculations wrong, we would be pilloried, and chased through the court system for non-compliance.

They do it, and apparently it's our fault?

Tom McClelland said:
A big problem surrounding all of this is that no-one outside HMRC really knows what is going on inside that body.

I would venture to suggest that no one inside really knows, either.

Tom McClelland · Nov 1, 2010

spencergate said:
Hells teeth, if we ran our operations in that way and used it as an excuse for getting our calculations wrong, we would be pilloried, and chased through the court system for non-compliance.

They do it, and apparently it's our fault?

The fact that some of these state "employers" were filing into a separate system is something that I was told, not my own sure and certain knowledge. But it makes sense as an explanation for why these problems are coming to light now, because apparently some internal work has been going on the join the systems.

spencergate · Nov 1, 2010

Tom McClelland said:
The fact that some of these state "employers" were filing into a separate system is something that I was told, not my own sure and certain knowledge. But it makes sense as an explanation for why these problems are coming to light now, because apparently some internal work has been going on the join the systems.

Fair enough, I understand that you can't be certain this was the case, but as you say, it would explain why the current problems are occurring.

Do you think we will ever get a full, honest explanation of what went wrong?

elaine@cheapaccounting · Nov 1, 2010

IT'S BONKERS

Fine to bring the systems together but write off the errors from the past.

Surely some one has some common sense to realise that the benefits paid by such systems are likely to be to the most vulnerable.

They must be someone who can take ownership for these issues and apply some well reasoned policy here.

This is a drop in the ocean compared to how much the government chuck at he banks to bail them out or how much MPs claimed in expenses!!!

elaine@cheapaccounting · Nov 1, 2010

spencergate said:
Do you think we will ever get a full, honest explanation of what went wrong?

I thought I was an optimist

elaine@cheapaccounting · Nov 1, 2010

Cannot give full details but just had another phone call from a person in receipt of incapacity benefit plus NHS pensions ...

A trend developing maybe ....???

spencergate · Nov 1, 2010

elainec100@cheapaccounting said:
I thought I was an optimist

I know, I know. But I really do feel that, as these public servants are paid by us, there should be some accountability to us when it goes THIS wrong

elainec100@cheapaccounting said:
They must be someone who can take ownership for these issues and apply some well reasoned policy here.

That is another public sector issue tho' isn't it? No one takes ownership of projects properly, it's all done by committee, so there is no one who will take the blame if it doesn't work and conversely, no one gets the credit when it goes right, so the incentive to get it right is seriously diluted.

elaine@cheapaccounting · Nov 1, 2010

spencergate said:
I know, I know. But I really do feel that, as these public servants are paid by us, there should be some accountability to us when it goes THIS wrong

That is another public sector issue tho' isn't it? No one takes ownership of projects properly, it's all done by committee, so there is no one who will take the blame if it doesn't work and conversely, no one gets the credit when it goes right, so the incentive to get it right is seriously diluted.

Agree with you 100%

I just want common sense applied but the issue with common sense if that it just doesn't seem to be that common these days

Tom McClelland · Nov 1, 2010

spencergate said:
I know, I know. But I really do feel that, as these public servants are paid by us, there should be some accountability to us when it goes THIS wrong

That is another public sector issue tho' isn't it? No one takes ownership of projects properly, it's all done by committee, so there is no one who will take the blame if it doesn't work and conversely, no one gets the credit when it goes right, so the incentive to get it right is seriously diluted.

And by the time a big project comes to fruition (or doesn't) the minister originally responsible is long gone, and probably all the senior officials have changed too.

I've seen private-sector ventures where ownership was by committee, and they were just as bad, but the problem is far more common in public sector projects that I've been involved in.

thebigIAM · Nov 3, 2010

As a layman watching this thread with increasing confusion, what happens if Mrs P doesn't forward a cheque?

Can the taxman manage to claw it back through somehow accessing her pension before she gets it? Do they make her bankrupt? How does it all work? What is the worst case scenario?

elaine@cheapaccounting · Nov 3, 2010

thebigIAM said:
As a layman watching this thread with increasing confusion, what happens if Mrs P doesn't forward a cheque?

Can the taxman manage to claw it back through somehow accessing her pension before she gets it? Do they make her bankrupt? How does it all work? What is the worst case scenario?

I am working on an example of how this will be collected right now - so watch this space.

Even us accountants are getting confused with some if the stuff HMRC are doing here!

I cannot believe that more people are not jumping up and down in rage about it

thebigIAM · Nov 3, 2010

That has to be the most prompt reply I have ever seen! I will watch this space.

elaine@cheapaccounting · Nov 3, 2010

thebigIAM said:
That has to be the most prompt reply I have ever seen! I will watch this space.

always in the right place at the right time!

jeand · Apr 26, 2011

Hello there,

I replied to the HMRC underpaid tax demands with an objection and template letter claiming ESC A19. The HMRC were claiming for the years 2007 - 2008 / 2008 - 2009 and 2009 - 2010.

I have just received their response to my letter stating they agreed that I did not need to pay for tax year 2007 - 2008, which amounted to £1,123.44.

An attached letter stated that I did not meet the ESC A19 for the years 2008-2009, which they are demanding £617.95. In addition, the other years in question, 2009 - 2010, had an overpayment of £12.80.

I am retired and had part time employment until April/ May 2009.

In addition to this, the 3 letters I was sent only had the correct National Insurance number on 1 of them.

What is happening in this country.

Thank you for your assistance in this matter.

Regards,

Jean

QuickHomeBuyers · Apr 27, 2011

jeand said:
Hello there,

I replied to the HMRC underpaid tax demands with an objection and template letter claiming ESC A19. The HMRC were claiming for the years 2007 - 2008 / 2008 - 2009 and 2009 - 2010.

I have just received their response to my letter stating they agreed that I did not need to pay for tax year 2007 - 2008, which amounted to £1,123.44.

An attached letter stated that I did not meet the ESC A19 for the years 2008-2009, which they are demanding £617.95. In addition, the other years in question, 2009 - 2010, had an overpayment of £12.80.

I am retired and had part time employment until April/ May 2009.

In addition to this, the 3 letters I was sent only had the correct National Insurance number on 1 of them.

What is happening in this country.

Thank you for your assistance in this matter.

Regards,

Jean

What is happening to this country?

People are trying to run away from their obligations, you owe the money, plead a payment plan, pay up.

Tom McClelland · Apr 27, 2011

Batra Ventures UK Limited said:
What is happening to this country?

People are trying to run away from their obligations, you owe the money, plead a payment plan, pay up.

That is pretty harsh. We have a retired person here who was supplementing their income by working. Presumably a praiseworthy activity. They had every reason to suppose that their tax affairs were being handled correctly, particularly since HMRC has had all the information they would have needed to correct the matter so that the OP paid the correct tax in the first place since May 19th 2008. To come back when they've had the correct information for nearly 3 years now, and demand the back tax from someone with limited income who may well have spent the money thinking (perfectly reasonably) that it was his, is wicked.

jeand · Apr 27, 2011

Thank you Tom for your kind support.

Before falling into ill health I was working in part time employment to supplement my pension. I do not receive and benefits of any kind from the Government and I have worked all my life without any benefit claims, receiving only family allowance.

I have fulfilled all my obligations during the extent of my working life. In good faith my tax demands were met and that includes the years in question. This mistake was not my fault!

Please don't even concern yourself with the 'harsh' words uttered by posting at 12.32. as I have nothing to be ashamed about. I suspect it is a computerised reply anyway and not an authentic human being as the comments are emotionless and severely lacking in sentiment. If it was composed by an actual person and not a virtual person, they had not even one gram of civility and courtesy to include their name.

Thanks again Tom,

Regards,

Jean

elaine@cheapaccounting · Apr 27, 2011

Jean - please follow the advice given on my blog on how to fight the case:

http://www.cheapaccounting.co.uk/blog/?p=1436

The approach works as we have won many cases.

Speaking from a position of knowledge on this matter - it is far from anyone avoiding paying what they owe.

jeand · Apr 27, 2011

Hello Elaine,

Thank you very much for your very prompt response.

I will take your advice and let you know the outcome.

Your assistance in this matter is appreciated.

Regards,

Jean

wizzard · May 1, 2011

jeand,

Batra is a human, some members on here can be a little harsh with their comments.

Sorry folks we don't live in a black and white world, it would be great if we did, less complications.

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HMRC demand £2,000 underpaid PAYE tax from the most vulnerable!