Make sure to check HMRC's calculations of overpaid and underpaid tax.

Tax Demands and Refunds

It appears that problems with HM Revenue and Customs’ computer have caused millions of taxpayers to have underpaid or overpaid tax between 2008 and April 2010 and many of these people will be receiving letters between now and Christmas to notify them of this and to ask for tax to be repaid in some cases. There are also problems in earlier years which could take HMRC several years to resolve.

If you get such a letter, it is always worth checking HMRC’s calculations of how the tax overpayment or underpayment has been calculated. Their calculations are not always correct. 

In some cases, it could be worth appealing against any demand for repayment of tax. This will especially apply where HMRC have received, in time, all the information needed to have ensured that notices of coding were correct, so that no underpayment should have arisen.

We expect that this problem will not affect our clients where a tax return is prepared, but if you receive a letter from HMRC, it is important that you ask us to check the details so that we can advise.   

It is to be hoped that online filing of payroll returns will improve the situation in future so that PAYE notices of coding are issued correctly.

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