I thought that I would share this via my social media channels as it occurs to me that many people may find themselves in a similar situation.
Earlier this year my father received his updated Tax Code from HMRC.
As in previous years the Tax Code was wrong.
HMRC claim that Dad has underpaid tax in a previous year by £238.
Not a vast amount but a lot for dad to pay out especially as he doesn’t actually owe a penny!
Tax affairs in good order
Obviously having me as a daughter Dad’s tax affairs are kept in good order.
Not trusting HMRC I make sure that Dad files a self assessment tax return each year. In reality I do this on his behalf …. I don’t even charge him for it 🙂
The self assessment is prepared and filed before the deadline each and every year.
Dad settles any tax due; again before the deadline.
All of this is reflected in the HMRC Gateway.
The HMRC system shows that Dad does not owe any money.
So why HMRC have issued a Tax Code showing that he owes tax?
Where have they got the £238 of underpaid tax from?
What systems are they using as it clearly is not the same one that we see?!
Letter to HMRC
To put matters right I drafted a letter to HMRC for Dad to send. I think it is straight forward and self explanatory ……
Dear Sir / Madam
Tax Reference xxx/xxxxx NINO xx xx xx xx x
The notice of coding issued in February 2016 for 2016 / 2017 is incorrect.
You show an underpayment restriction of £1190 because you say that I owe tax of £238 relating to a previous year.
You are wrong.
If you check my online account status via the Government Gateway (i.e. on your system) this shows that I have nothing to pay.
Therefore can you please provide a full explanation of how you have calculated the £238 underpayment.
If you have no explanation then I suggest that you revise my tax code.
I look forward to hearing from you soon with the correct tax code.
HMRC do get it wrong
Just because an official looking letter arrives on your door mat in a brown envelope marked with HMRC doesn’t mean that it will be correct – HMRC do get it wrong.
Having spent many years dealing with them I can vouch for this.
Much of my time and that of my colleagues and peers is spent dealing with HMRC errors. It’s become a “business as usual” activity for us.
We NEVER assume that anything we receive from HMRC is correct – we ALWAYS check it.
What worries me is how many people would pay up tax demanded without challenging the calculation just because there is a misconception that HMRC must be right.
How much do HMRC collect in taxes due to incorrect demands?
Do not be afraid to challenge HMRC
If you do not think you owe anything in tax and receive a tax demand or you receive a notice of coding which you do not understand do not be afraid to challenge HMRC.
Write to them and ask for an explanation of their tax calculation or of their tax code breakdown.
Continue to query this until you get an explanation that you can understand and that matches your records.
Always keep any tax documentation and financial records so that you can back up your calculations.
Making Tax Digital
You’ve got to hope that HMRC’s flagship making Tax digital project will see the end to these silly errors and incorrect demands for tax which is not due.
I think that I am too old and cynical to believe that HMRC errors will be eliminated by the implementation of a new IT system … let’s face it they have got to get it to work first!