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HMRC tax blunder: question and answer

By Channel 4 News

Updated on 07 September 2010

Channel 4 News asks personal tax expert, Angela Beech, what action you can take if you receive a letter from Her Majesty's Revenue and Customs (HMRC) warning that you have been paid the wrong amount of tax following a calculation error.

What is the first thing I should do if a letter arrives from Her Majesty's Revenue and Customs?
You do always need to check the figures.  The tax people are human beings just like we are and make mistakes.  Make sure they've included all the reliefs you might be entitled to, they've got your personal allowance right, if you've made charitable payments they're included or pension payments.  Check the figures, make sure they're accurate. 

Can I refuse to pay the money back?
If you've told the taxman that you've changed jobs or you're getting a new pension or a new benefit from work and they haven't taken action to make sure you're paying the right tax, once 12 months have gone by from the end of that tax year, they can't pursue you for the tax. So you can say to them "forget it, I'm not paying, it's your mistake, you have to deal with it".

It's HMRC's mistake so why should I have to repay the money at all?
At the end of the day taxes are used to run the country and we have a duty to pay the right tax. The fact there is a loophole is really there for those who made the revenue aware of their situation and the revenue have failed to take action. If you do owe tax you really should pay the right amount. As some people have said already today it's an interest free loan you've had, but there may be some interest that they will charge you but it is still cheaper than a credit card bill.

What if I can't afford to pay?
It's not going to be unusual that people, particularly pensioners or someone who's been made redundant, can't afford to make tax payments. Talk to the taxman, don't bury your head in the sand and think that it'll just go away. Contact them, tell them your circumstances and they may be able to come up with a payment plan so you'll pay it off on a monthly basis. The only thing is they'll still charge you interest for as long as it stays unpaid, but at least you're not going to get the bailiffs at the door or debt collectors on your back so contact them.

Are there any scams I should be aware of?
I myself have received an email scam from the revenue, or purporting to be from the revenue, saying that I was due a tax refund. There is one thing for certain, the tax office will never send you an email so if they send you an email about a refund you can delete it or forward it onto the tax office so that they're aware of all the scams that are going on. The other thing is, you won’t get a telephone call from the revenue if they owe you money so again if you get a call from the revenue saying you're due a refund and asking you for bank details or credit card details then hang up. It's not the revenue calling you.

Was this an accident waiting to happen?
It's not unsurprising; it's basically exacerbated as the years have gone on. When we saw the accounts being published and 18 million tax payers were potentially affected by this problem we weren't really surprised. It's gone up from 12 million to 18 million in one year.

Is the current tax system still fit for purpose?
It certainly does need a change. It worked fine when people had one job or a job for life but nowadays you have people with numerous jobs, with self employment, different pensions being paid. It's far too complicated. The Pay As You Earn (PAYE) system, as we know, just doesn't work after sixty years.

What needs to be done to fix the system?
Basically we need to go back to having one person's tax affairs dealt with by one tax office. At the moment if you've got different sources of income different tax offices deal with it and they don't talk to each other, so you end up with this problem where you could underpay tax or even worse overpay.

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