I Got My Tax Demand Written Off: A Case Study

Thousands of people across the UK had a nasty surprise at the end of the last tax year. Because of a series of major mistakes by HM Revenue and Customs (HMRC), many people paid the wrong amount of tax. HMRC had incorrectly assigned tax codes and, as a result, taxes were incorrectly calculated.

While some people were in line for refunds, others found themselves presented with Demands For Underpaid Tax. This has caused significant financial and mental strain for many.

Possible solutions

Thankfully, though, there are circumstances in which you may not have to pay these demands. If it can be shown that HMRC has not complied with its legal requirements, it is possible to have them written off. We spoke to a Londoner who received a tax demand at the end of 2010 – but who has since had the demand written off.

“I got a letter out of the blue just before Christmas, telling me I had underpaid my tax by almost £3,000,” she says. “It obviously came as a shock. You just assume that your tax is coming out of your pay packet properly every month.

“The letter said that, because of the amount that I owed, I would have to pay it back in instalments. That panicked me a bit. Like everyone else, there’s not a lot left at the end of every month, and I didn’t really know how I was going to pay it.”

Without knowing who else to speak to, the woman called her local Citizens Advice Bureau.

“I don’t have an accountant, so the Citizens Advice Bureau seemed like the obvious place to ask for help. They told me that, because the demand related to a tax year that ended a couple of years previously, I might not have to pay.”

ESC A19

HMRC can only legally demand money for underpaid tax if they can prove that they acted on the information with which they were provided within 12 months of the end of the relevant tax year. Despite this rule, the taxman seems to have issued thousands of demands relating to cases in which they either failed to act on information, on in which they acted too late.

“I was told that I needed to apply for an extra statutory concession. This basically meant that I had to phone the Tax Office and explain to them why I thought they had broken the rules. It was nerve-wracking, but I made sure that I had all the paperwork I needed in front of me, and I knew exactly what I was going to say.

“Eventually, they wrote to me again and told me that they weren’t going to be chasing the money. It was a huge relief.”

The extra statutory concession is contingent on HMRC being satisfied that you believed your tax affairs were in order – so if you noticed that you were being taxed too lightly at the time, you don’t stand a good chance of success.

But, if you are presented with a tax demand and you believe that HMRC has not acted within the rules, an extra statutory concession may be the answer. In order to make a claim, you should phone HMRC on 0845 300 0627, and quote ESC A19.