Over two years ago I wrote this blog, aimed at helping those who had received unexpected tax demands from HMRC:

Click to go to Persistence, Patience and Tenacity Required as HMRC Ignore their own Tax Payer Charter! – PAYE Fiasco

Two years on and, as highlighted in the story in the Daily Mail on Friday, another 2 million people, assuming that their tax affairs are in order, will be receiving a demand for underpaid tax.

We’ve handled many cases so far with demands from £1,000 up to over £9,000.

Our experience to date is…

• HMRC take an unnecessary and excessive amount of time to respond to correspondence
• They are not being consistent in their approach – cases with similar backgrounds are having tax written off whereas other similar cases are having to proceed to complaints
• HMRC will nearly always reject your case initially
• Their approach is to demand the tax without listening to facts
• Persistence through to complaint and adjudication is the only way to get your tax demand dealt with correctly

Here is my advice on how to deal with your letter from HMRC …..

What should you do if you receive a tax demand?

Stage One

The first thing to do is to check that the calculation is correct.

Assuming it is correct then for 2012 / 2013 HMRC will be within their time limit to collect any underpaid tax unless you can show that the error was not your fault.

The main reason for the underpayment not being your fault is where your employer or pension provider has not followed the PAYE procedure correctly and has made an error.

In this case the law states that HMRC should seek the underpaid tax from the employer or pension provider and not the individual.

However you must be certain that it is your employer or pension provider that did make the error.

Did you tell HMRC and / or your employer about a change in your circumstances e.g. a new or second job, additional income, a pension ? If this is the case, and you have paper work to show this to be the case then the error is not your fault.

I am not going to re-invent the wheel on letters to send to HMRC regarding the underpayments of tax as the Low Incomes Tax Reform Group has prepared sample letters and these can be found on the Guardian Web Site here:

http://www.guardian.co.uk/money/2010/sep/07/tax-error-letter-templates

(I shan’t copy them in case of copy right).

Use the text for letter two “If your employer/pension payer made an error” and send this to HMRC.

No doubt HMRC will reject your request to reclaim the tax from your employer or pension provider.

So then move onto ……

Stage Two

If HMRC rejects the write off then do not give up.

The next stage is a complaint. You can read more about how to make a complaint to HMRC at:

http://www.hmrc.gov.uk/complaints-appeals/how-to-complain/make-complaint.htm

Here is the text for your complaint letter …

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Dear Sir / Madam

Your Name here

National Insurance Number – your NI number

HMRC reference number – the reference on the letter

Complaint – Handling of Underpaid Tax

Thank you for your letter of (enter the date of the letter from HMRC).

I would like to raise a formal complaint regarding this matter.

I had provided all relevant information to my employer / pension provider [delete as applicable]. The underpayment arose because of a failure by my employer / pension provider [delete as applicable] to operate PAYE correctly. Given this you must reclaim the underpaid tax from them and not me.

To tell me that I should repay the underpaid tax is incorrect and I do not agree with your decision.

Can you please:

• acknowledge receipt of this complaint letter, by return
• advise me of the complaints procedure and how long it will take for you to review this matter
• let me know your outcome and the reasons for reaching your decision

I look forward to hearing from you and hope that this matter can be resolved very quickly.

Yours faithfully

—————————————————

Stage Three

If that doesn’t work then you should take the matter to the Adjudicator.

Whilst this may seem very scary do not be deterred – it does work; we received a letter from a tax payer who did just that and had over £2,500 written off by the Adjudicator.

If you are right – fight and fight hard.

Of course no one likes a tax evader but that is NOT what you are – you did the right thing and “the system” let you down.

Having helped well over 100 individual cases unfortunately we are no longer able to provide any free help on this matter. The above covers what you need to do – please follow it, it does work.