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New advice issued over HMRC tax blunder

New advice issued over HMRC tax blunder

Category: Money

Updated: 13/10/2010
First Published: 13/10/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

People who have received a letter from HM Revenue and Customs (HMRC) after paying the wrong amount of tax have been urged to check the new figures are correct.

In September it was revealed that a computer error had led to around six million people in the UK paying the wrong amount of tax over the past two years.

While some will have to make up a shortfall, others will be receiving a cheque in the post reimbursing the extra tax they have paid. Around 1.4 million are thought to have underpaid on their tax as a result of the problem, while some 4.3 million have paid too much.

In total, around £2 billion is owed to the Government purse, working out at an average underpayment of around £1,500 per affected person. As the Treasury attempts to recoup the money it is owed, some people will be hit with a higher tax bill over the coming months.

However, for those taxpayers who have been overpaying their tax, a welcome surprise is in store. Rebates totalling £1.8 billion are thought to be owed to those who have paid more than they should, averaging out at around £418 per person.

HMRC has now started sending out the main bulk of calculations to people who they think have been affected, with all the letters due to be delivered between now and Christmas. However, the Low Incomes Tax Reform Group (LITRG) has warned those who receive a letter it is still a good idea to check that the calculations are now correct.

"Just because HMRC send you a P800 calculation, it doesn't mean to say that the figures it shows are right, or that you have to repay any underpayment shown," said John Andrews OBE, chairman of LITRG.

Mr Andrews first advises people to contact the HMRC if they find any errors or have any doubts.

"Next, if the statement shows you owe tax, consider whether you have to pay it back," he added.

"It could be too late for HMRC to be entitled to assess it; or it could be down to your employer's or pension payer's error, in which case they (not you) are normally liable for any underpaid tax.

"Finally, consider whether HMRC ought to write off the tax under their concession A19, or under their complaints procedure."

If all else fails, Mr Andrews says that as it was HMRC's delay that caused the unpaid tax to mount up, they ought to be prepared to give people time to pay. However, he warns people to take care in negotiating payment terms with HMRC, as it could affect some people's entitlement to means-tested benefits.

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