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Potential underpayments of income tax will not be written off, the exchequer secretary to the Treasury, David Gauke, has confirmed.
In a statement to the House of Commons regarding the well-publicised PAYE errors by HMRC, Mr Guake explained that the department usually carries out end-of-year reconciliations to ensure taxpayers have paid the correct amount of tax under PAYE.
Each case of potential overpayment or underpayment has to be reviewed individually before reconciliation can be finalised, which is ‘inefficient and clerically intensive work, and… resulted in a backlog of open cases’.
Mr Guake went on to say that ‘no reconciliation process was undertaken last year, so this year HMRC had to complete the reconciliation for two years instead of one’.
As a result, ‘about 4.3 million taxpayers will receive repayments between now and Christmas, while 1.4 million will be sent letters specifying how any underpayment has been calculated and how such payments can be reviewed’.
He said the total owed is approximately £2 billion and, because of the public deficit, the Treasury can ‘not afford to write off all the underpayments’.
However, Mr Guake confirmed that HMRC will allow taxpayers' payments to be spread across a period of three years, and the department will not ‘pursue cases when the amount owed is less than £300 — that is an increase from the previous threshold of £50 — which applies to 40% of all underpayments’.
He also referred to ESC A19, but said that ‘from historical experience, that is unlikely to apply to many cases’.
The Revenue, whose new computer system matches records automatically to ensure the correct amount of tax is paid, has a web page covering PAYE calculations.
The department reminds taxpayers that it will not contact them by telephone or email unprompted. Unsolicited contact is most likely to be a scam, and no personal information should be given out.
