The Daily Mail recently ran an article on people being sent demands from HMRC for tax arrears which had built up due to the high income child benefit tax charge.
You can read the full article at:
Having looked at this in a bit more detail I think there is grounds to ask for HMRC to write off the tax arrears under what is called the ESC A19 rules.
Read about this at https://www.gov.uk/hmrc-did-not-act
Very simply …. HMRC had the information, didn’t act on it and allowed tax arrears to build up.
HMRC administer Child Benefit
The crux of this appeal rests in the fact that HMRC administers Child Benefit. They have the information on Child Benefit payments. They should have systems, processes and procedures in place to use the information that they have to make sure that the right amount of tax is paid at the right time.
HMRC should let people know if they have not paid the right amount of tax.
If they do not act on the information that they have and allow more than 12 months to pass then it’s their failing and the honest tax payer, who has a reasonable belief that their tax affairs are up to date, should not suffer because of it.
What tax could be written off?
HMRC should not allow more than 12 months of tax to build up.
So, as at the time of writing this, any demands for the following tax years can be appealed:
2014 / 2015 ended 5th April 2015. Tax arrears should have been notified by 5th April 2016
2015 / 2016 ended 5th April 2016. Tax arrears should have been notified by 5th April 2017
2016 / 2017 ended 5th April 2017. Tax arrears should have been notified by 5th April 2018
No guarantee of success
Obviously there is no guarantee that HMRC will act appropriately and do the right thing. Although if they do not then I would suggest going through their appeals process, see here for more details https://www.gov.uk/tax-appeals. You may need a professional to help you with this e.g. an accountant. Obviously the cost of this would need to be considered but it may be worth the investment if the amount of tax being demanded is large.
The following is a sample letter to send to HMRC. Send the letter to your HMRC contact by registered post. Feel free to change the letter but I would suggest avoiding pages of detail to be included although you may wish to include a brief bullet point summary of important dates when you had contact from HMRC.
If you do use this letter please keep me posted with the outcome although I will be unable to get involved in the detail of specific cases. Good luck
Reference [put your reference numbers here]
ESC A19 Claim
With reference to your demands for additional tax as a result of the High Income Child Benefit Tax Charge I formally ask you to apply an extra-statutory concession’ (‘ESC A19’) and withdraw the demand for underpaid tax as I think that you did not act on the information that you held.
All of the conditions for the ESC A19 have been met being:
HMRC haven’t used tax information provided to them
HMRC have responsibility for the administration of Child Benefit:
See Responsibilities Section.
HMRC told me about the tax I owe more than 12 months after the end of the tax year in which they received my information
You are claiming tax for the tax year 2014 / 2015 onwards. More than 12 months had elapsed before you demanded tax for this tax year and the subsequent tax years 2015/ 2016 as well as 2016 / 2017.
I have a reasonable belief that my tax affairs are up to date
HMRC have the information about my earnings from the PAYE system. HMRC have information about the Child Benefit I receive as they administer the Child Benefit System.
You “help the honest majority to get their tax right” [source https://www.gov.uk/government/organisations/hm-revenue-customs/about]
As part of the “honest majority” I have a reasonable belief that my tax affairs are up to date.
As part of the “honest majority” it is reasonable for me to assume that HMRC have the necessary systems, processes and procedures in place to gather and amalgamate the information that they hold (earnings, child benefit payments etc) to make sure that I have paid the right amount of tax at the right time.
As part of the “honest majority” I should not be penalised for HMRC’s inability to operate appropriate systems, processes and procedures to ensure that the right amount of tax is paid. Nor should I be expected to pay arrears that you have allowed to build up because you have not acted in a timely fashion on the information that you hold.
It is your failings that have created the tax arrears.
Please acknowledge receipt of this letter and provide a final outcome on the ESC A19 application within 28 days. Should the underpaid tax not be written off then I will appeal your decision and take this through your Appeals Process if necessary.
If you are unable to provide a final outcome letter within 28 days then please do write to tell me why and how long it will take you to provide a final outcome letter. Having a demand outstanding for underpaid tax is stressful, especially as it is due to failings within the HMRC administration. I would like to see this matter brought to a swift conclusion.
Yours (sincerely or faithfully depending on if you have a named contact or not)