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I wholeheartedly agree with Paul McKay’s views in his article Jumping the gun, particularly the high level of responsibility put upon taxpayers to ensure they know how the tax system works.
It’s particularly galling that HMRC demand this of an individual when that same understanding is not demanded of departmental staff themselves.
I would hazard a guess that the number of officers who could “do the numbers” and work out a taxpayer’s income tax liability without access to their computer is very low – and would be almost non-existent for family credit calculations; believe me, I’ve tried, and I like numbers.
In addition, how many could analyse why the end result is what it is, or explain that to the taxpayer?
I was asked by a colleague in March why he had been given a significant tax repayment in his pay packet that month (month 12) but, not having had sight of any PAYE codes, could only suggest that it might be down to the code HMRC had applied that month, the net effect being that the pay tables indicated he had overpaid tax as at that date.
However, I warned him that it probably wasn’t correct and that HMRC would probably want the tax back once the employer end of year returns had been processed.
Surprise, surprise: my colleague has collared me today to say he has now received a P800 tax calculation showing in excess of £1,000 of tax due, to be collected by a coding adjustment in 2013/14.
My colleague has a small pension in addition to employment income, but neither make his a complicated case, except it would appear he has been given personal allowances against both sources… and not for the first time.
HMRC claim that it should be obvious to an individual when they have been given two personal allowances but the plain fact is, it just isn’t.
My colleague is not an idiot, but just made the assumption on reading each PAYE code he received: “Personal allowance; yes, I’m entitled to that”.
The matter of tax years and different income sources really does not enter the mind of the average working man in the street.
As much as HMRC or, indeed, we tax professionals, might expect him or her to have an understanding about their tax affairs, the reality is far different.
As to HMRC’s explanation on the P800 as to why the underpayment had arisen, this one stated “The reason … is set out on the enclosed sheet.”
The first “enclosed sheet” was, of course, the page with the calculation on it, but it gave no explanation so I take it to actually mean the P800 notes and P800 additional notes that are routinely sent out with P800s nowadays.
Except these give many reasons why any taxpayer might underpay tax – plus lots of other information that has no bearing on the position – not the reason why this particular taxpayer underpaid tax.
If a person is unlikely to read and fully understand the content of a PAYE coding notice, then they are hardly likely to read and fully understand two, double-sided pages of HMRC notes, are they?
I know – having seen instances before - that an explanation can be accommodated on the space on the front page of the P800 although these are becoming increasingly vague, irrelevant or non-existent. Instances of good examples in the past have included:
An incorrect amount of state pension was included in your tax code for the year
You did not receive the benefit of all your tax free personal allowances (refund).
The amount of untaxed interest included in your PAYE code for the year was greater than the taxable amount.
- Instances of poor explanations have included:
- Insufficient tax has been paid under PAYE.
- Cessation repayment. (The client had died!)
- Details of how to pay will follow. (Seriously?)
There does seem to have been a shift in practice at HMRC recently as many P800s are now entirely devoid of any explanation whatsoever.
Even for those that do have one, obviously HMRC and I have a different understanding of what constitutes an explanation.
I would expect the relevant issues to be clearly and fully explained, whereas HMRC...? Quite frankly, I have no idea.
I appreciate that staff will just not have time to analyse the reason but equally I am sure, as I mentioned above, that many processing the case would not know why an underpayment has arisen in the first place.
This only adds further fuel to the argument that it is inherently unfair to expect a degree of understanding from one party if the same degree of understanding is not required of the other party.
But then, that leads me nicely on to the 'agent view' debacle, where HMRC were intending to visit agents whose client filing performance is not up to standard.
Are agents going to be given the opportunity to visit HMRC offices and enquire the same of staff there?
Lesley Rance
