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Around a quarter of a million pensioners will not have to pay the tax underpayments that were a result of the well-documented errors in HMRC’s tax coding system.
Extra-statutory concession (ESC) A19 will be applied to about 250,000 cases in respect of 2008/09 and 2009/10 where a taxable state pension had been paid by the Department for Work and Pensions and the tax due should have been collected through a code adjustment.
The individuals affected, who have not yet been issued a with a notice of underpayment, have a ‘strong case’ for their underpayments to be written off in line with ESC A19, said the Exchequer secretary to the Treasury, David Gauke, and as a result the Revenue will write off all relevant cases.
The move contradicts the minister’s remarks from September, when he said, 'From historical experience, [ESC A19] is unlikely to apply to many cases’.
Campaigning organisation the Low Incomes Tax Reform Group (LITRG) described Mr Gauke’s latest announcement as an ‘eminently fair and reasonable way of dealing with a situation that has arisen through no fault of the pensioners concerned’.
In written ministerial statement released to Parliament yesterday, the Exchequer secretary provided an update on the taxman’s longstanding attempts to adjust the PAYE set-up and clear the backlog of almost six million unreconciled underpayments and overpayments.
By the end of last year, HMRC had issued a refund notice or a calculation of overpayment to 90% of cases in which relevant information was received in regard to 2008/09 and 2009/10, said the minister.
He added that underpayment notices will not be issued for periods earlier than 2007/08 – for which year amounts due will be included, where possible, in the tax code for 2011/12. Sums for less than £300 will not be collected, and the Revenue will allow taxpayers to spread payments in cases of hardship.
The department expects to contact around 450,000 individuals before the end of March in an attempt to collect underpayments totalling approximately £180 million, said Mr Gauke.
The chairman of the LITRG, John Andrews, said he believed that many taxpayers who receive a demand for 2007/08 ‘will have a good case to resist the collection of the liability’.
