Recognise P14s

Dear Ms Homer,

I am sure many members of the tax profession would wish to acknowledge the efforts you have made in repairing the rift between HMRC and the tax advisory community since your appointment last year as chief executive.

I also recognise that your appointment has coincided with a period in which HMRC have been subject to a lot of public criticism, much of it unjustified and from people who really ought to know better.

However, there are some areas where the department is really doing itself no favours and is simply causing unnecessary friction between itself and compliant taxpayers (and those taxpayers who strive to be compliant). In this letter, I wish to focus on just one example: the application of extra-statutory concession A19 and the status of information sources such as the P14.

Hardly a week goes past when I do not receive an email from tax advisers around the country expressing their exasperation at what seems like total intransigence from HMRC in this area.

As I set out in various articles published in Taxation last year, it is totally clear that, historically, annual reconciliations of PAYE taxpayers’ affairs were regularly undertaken in tax offices by reference to the taxpayers’ P14s. Indeed, frankly there would be no other purpose in employers preparing these documents if it were not to enable this process to be undertaken.

Furthermore, it is similarly evident that the “prohibition” on using P14s for the purposes of ESC A19 is a relatively new invention, inserted in 2010, one assumes, in a cynical attempt to stem the tide of applicants for the concessionary treatment which would inevitably follow as a result of the introduction of the National Insurance and PAYE computer service later that year.

When one of your officers attempted to tell me last year that this prohibition was “implicit” in the original guidance dating back to 1971, I was unsure whether this was a deliberate attempt to mislead me or whether it was actually realised that the attempt would not have fooled anyone but had to be entered into for the sake of “form”.

From what it seems, officers around the network are being told to reject claims for ESC A19 which are based on the provision of P14s by taxpayers’ employers. When tax offices are being asked to reconsider these rejections, the rejections are confirmed.

However, it transpires that, when taxpayers (or their advisers) start to embark upon the complaints process, by the time of the third or fourth complaint the matter is escalated to someone suitably senior within HMRC who can make the decision to uphold the complaint and confirm that the taxpayer was entitled to ESC A19 after all.

I hear a similar story from a number of advisers in more or less similar terms: some do seem to have ways of short-cutting the process and getting the matter dealt with in a more streamlined fashion by cutting out some of the stages in the complaints procedure.

Others, however, are getting absolutely no joy whatsoever from HMRC and are having to refer complaints to the Adjudicator.

It seems that HMRC’s internal systems are designed to reject claims on the misguided basis that P14s are not to be treated as a relevant source of information for the purposes of ESC A19. This undoubtedly means that some taxpayers (most often the unrepresented) then give up their perfectly good claim.

The taxpayers who persist through the complaints procedures (spurred on no doubt by articles in the professional press) are instead made to jump through hoops that should not be there simply because HMRC refuse to do the decent thing and recognise that the cost-savings made in the mid-2000s were inappropriate.

Why should taxpayers engage professional advisers to assist them in this task just because HMRC are being procedurally dishonest? Why does the typical case require four requests rather than just one?

Why should professional advisers waive their fees simply because the amounts at stake – while important to their clients – do not warrant a charge for all the time spent on this issue?

It is important to remember that these PAYE cases typically involve taxpayers on lower incomes and include some of the most vulnerable members of society.

It is hard to believe that this is happening in what is supposed to be a civilised society which respects the rule of law. I am writing to urge you to establish what is going on internally and to ensure that this sorry saga is brought to a swift end.

Yours sincerely,

Keith Gordon

Issue: 4410 / Categories: Comment & Analysis , Admin