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KEY POINTS:
- Taxpayers are not customers
- The disadvantages of not completing a self assessment tax return
- The role and use of the form P810
- Trying and failing to get HMRC to put a simple problem right
- Are unrepresented taxpayers with straightforward affairs at a disadvantage?
It never ceases to amaze me that HMRC have adopted the word 'customer' to describe the taxpaying public.
A customer is someone who chooses to patronise a business for many reasons, the foremost perhaps being the quality of the proffered product, confidence in the provision of good customer service and the relationship which that engenders.
I appreciate that individual efforts are made by members of HMRC to achieve good service, but a recent experience has highlighted that the service received by tax professionals differs from that given to the 'customer' in the street, especially when that customer is outside the self-assessment system.
Once upon a time
My story begins with an individual taxpayer, whom I will name TP, an abbreviation of taxpayer, the term favoured by HMRC before we became customers.
TP, an employee paying the higher rate of tax, with a medical benefit in kind, modest bank interest and dividends and gift aid payments, was taken out of self assessment with effect from 6 April 2005.
HMRC had decided that self assessment numbers could be reduced and costs therefore saved, by collecting as much tax as possible through the tax code.
TP, who knows a bit about tax, was pleased to reduce his compliance burden and assumed that pains would be taken at the end of the year to check that the correct tax had been paid.
TP wondered how his tax would be checked without the issue of a tax return, which would bring him back into self assessment, but this was avoided by the issue in April 2005 of a form P810.
This was a quasi-return consisting of a double-sided A4 sheet on which TP was invited to record his non-PAYE income, gift aid payments, etc., in other words those items which had been estimated in his tax code.
Form P810 is not statutory, but return of the completed form by 30 September is requested, presumably to ensure that any unpaid tax can be collected through the following year's code.
So far, so good: TP was not unduly worried by completing a non-statutory form, which he did in July 2005 and heard nothing back from HMRC.
The following April, TP assumed that a similar form would be issued, but nothing landed on the doormat until August 2006, when a tax calculation for 2004-05, based on the form completed for that year, was issued and November 2006, when a 2005-06 calculation, based purely on estimates (save for the figures provided by the employer) arrived.
These were followed quickly by coding notices for 2006-07 and 2007-08.
TP was not unduly worried, although the 2004-05 calculation was too late for the underpaid tax of £140 to be collected via the 2006-07 tax code.
However, this sum was subsequently coded out in the 2007-08 code and TP was pleased that HMRC had allowed him the extra year to settle the amount owing.
The 2005-06 calculation concerned him. It showed tax due of about £130, which TP worked out would also be collected through his new 2007-08 tax code.
He calculated that he owed about £32, which he thought would not be collected, being such a small sum. He felt, however, that a lot of trouble could have been saved had HMRC asked him to complete a form P810 for 2005-06.
Direct approach
So TP called his tax office. He asked about the appeal period for the 2005-06 calculation and was told that there was none, he should just 'write in'.
He did so, taking the precaution of ensuring that his letter was within 30 days of the calculation received and explaining in detail what was wrong in the 2005-06 computation.
He asked for confirmation that the calculation would be corrected and that the minor sum would not be collected. In January 2007 he received assurance by letter that this was so, although nothing subsequently happened to correct the tax calculation or his tax code. TP wrote again to his tax office, but nothing happened.
By now (January 2007), TP had received: an incorrect calculation for 2005-06 and incorrect coding notices for 2006-07 and 2007-08.
Furthermore, the use of the month one basis meant that tax was potentially being underpaid for 2006-07. TP's irritation was exacerbated by the receipt in January 2007 of a tax code for 2007-08 showing the (agreed) tax for 2004-05, the appealed incorrect tax for 2005-06 and an estimated underpayment for 2006-07.
TP called HMRC again and followed up with a letter in March 2007. Nothing happened. Once again, HMRC made no effort to check the position after 5 April 2007.
In July 2007, after the employer had submitted the 2006-07 P11D, TP received a revised code for 2007-08, which was amended to bring his medical benefit in line. He telephoned the tax office again and received a recorded message asking him to try later, with no option of leaving a message.
TP was by now beginning to worry: he realised that he was caught in an alternative system to the statutory mechanism for compliance, self assessment. He was not sure of his rights or if, indeed, he had any rights at all.
What he was sure of was that he was entitled to pay the right amount of tax for his circumstances and no more.
On the record
So he did two things. First, he obtained the number of an agents' helpline and called it (more of which below). Secondly, believing that this was the only way to put on record his actual income and outgoings for the two years concerned, he completed SA tax returns for 2005-06 and 2006-07.
He included a white space note inviting HMRC to correct the non-self assessment tax calculation and was pleased to note a small refund for 2006-07.
Still nothing happened.
In the period July to September 2007, TP received four tax codes for 2007-08. He called HMRC, using the customer number at the top of his coding notices, on three occasions, only to receive the same recorded message and, each time, he reverted to the agents' helpline.
Using the helpline, he spoke to three different individuals and explained precisely why he was calling and what should be done to correct his tax code.
Each time he succeeded in obtaining a partial amendment of the code, until finally he convinced someone that what he was saying was accurate and his code was corrected.
On one occasion he succeeded in getting the code partially changed, only to receive unexplained a further code some three weeks, later reversing the amendment.
The self-assessment tax returns were processed separately. TP realised on receiving a demand for £32 that the 2006 return had been processed.
This tax, the reader will appreciate, was already the subject of a coding adjustment and he had been informed on an earlier occasion that such a small sum would not be collected.
In desperation and while on the telephone to HMRC, TP agreed to pay this tax, despite the knowledge that this sum was covered by a refund for 2006-07. Said refund was issued almost two months later.
At this point, TP thought all was sorted, but he has just received a tax code for 2008-09 showing a tax underpayment of £28, the source of which is completely unknown.
Naturally he has been removed again from self assessment and the whole saga is set to repeat itself. No amended non-self assessment tax calculations were ever issued
Got a headache?
If the reader has managed to get to the end of TP's story without being in a state of total confusion, I congratulate him.
TP, an intelligent person with a knowledge of tax, was also confused and could imagine how befuddling the above would be for a taxpayer (sorry, customer) with little knowledge of the system.
No explanation was issued by the tax office when it produced the estimated 2005-06 tax calculation, and the tax coded out for the various years was not itemised or justified.
It seems that taxpayers with little knowledge of the system would not realise that they were overpaying tax and could go for years within this 'sub-system' in a state of complete bewilderment.
Both the form P810 and the tax calculations appear to be outside the statutory system, which is encoded in the self assessment legislation. Moreover, although the informal P810 was adequate for the job, it was only issued on one occasion, so that TP was unable to rely on any of his tax codes, as none of the detail of his non-PAYE income and outgoings had been verified.
We seem to have a two-tier system which favours the more well off, represented taxpayer, filing via SA. As a 'PAYE customer', TP was in a grey area without any apparent rights.
Communication problems
The position for TP was exacerbated by his inability to reach the tax office using the telephone number at the top of HMRC's correspondence — standard correspondence as seen by the writer is helpful and friendly in tone and invites taxpayers to telephone.
The service received, with not even an answerphone system in place, belies the aim of offering a helpful and responsive service.
Email communication with tax offices is still not possible. If a commercial business were to operate in this way, it would soon have no customers.
TP was lucky: he was aware of the self assessment system and the agents' helpline and his employment is such that he can make a telephone call in the course of the working day. Many unrepresented taxpayers do not have access to a telephone during normal working hours.
One is reminded that HMRC are constantly seeking to operate at a more cost-effective level. This is to be applauded, as long as it can be achieved while helping taxpayers to pay the right amount of tax.
In fact, chapter 1 paragraph 1.1 of HMRC's consultation document of 10 January 2008, 'A new approach to compliance checks' states the reduction of compliance costs for compliant taxpayers as one of its aims.
In TP's experience, this could have easily been achieved by the continued issue of the, albeit non-statutory, form P810 at each year end.
TP's experience shows the sub-system to be inflexible and fragmented.
With each call that he made to HMRC over a three-month period, he had to go through the facts of his case again, but was never put through to someone who could deal with all matters at once.
This was a simple case of small amounts of tax underpaid and incorrect tax codes, yet TP felt his only recourse was to put himself back into the SA system voluntarily, with the associated costs that HMRC sought to avoid by removing him in the first place.
The aforementioned consultation document admits, at 3.3 of Chapter 3, that 'the self assessment taxpayer has a clear structure setting out… the taxpayer's rights... Conversely, those (taxpayers) not in self assessment have fewer and less specific rights and statutory safeguards'.
This is one of the bases for HMRC to seek a method of checking compliance for taxpayers such as TP.
As HMRC understand that a two tier system is at work, their approach to compliance checks must necessarily be aimed at those who are less than squeaky clean in their attitude towards compliance matters.
Most of us would agree that this is where tax is lost, but taxpayers like TP are inadvertently contributing too much to the Treasury's coffers.
Not so happy ever after
TP is not relishing the impending struggle now that a new tax year has started, and may well put himself back in the system voluntarily.
Is it too much to ask HMRC to invest in a straightforward and responsive system which will enable people like TP to communicate effectively with sufficient numbers of well-trained HMRC staff and to have confidence that they are paying the right amount of tax?
Julie Cameron is a senior manager in Baker Tilly's Guildford office and can be contacted on 01483 307194.
