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Where Taxpayers and Advisers Meet

Underpaid tax

Posts: 1
Joined: Thu Nov 22, 2018 5:55 pm

Underpaid tax

Postby Nirvana80 » Thu Nov 22, 2018 6:18 pm

Hi there, I’m cureently helping my mother with a tax problem that I can’t for the life of me figure out what to do.

She received a letter for underpaid tax from the year 14/15, owning £76.90. From what I gather she’s had a letter before about it before but unfortunately didn’t understand it and assumed it was a mistake as the letter said self assessment and she’s employed through a huge company.

She has received 3 letters in the same envelope, basically saying she has an outstanding tax replayment and each letter is dated 2015/2016/2017. I have been on the phone to HMRC and they say it’s from one outstanding tax underpayment from the year 14/15. After talking a while and trying to find out the reason it happened, the conclusion was made that it was from a wrong tax code earlier that year (OT), and she was repaid the tax through her payslip. They claimed she was repaid too much and that’s why she received the underpayment letter at the end of the year for the £76.90.

They have advised that she pay the amount online and appeal all the penalities, they couldn’t confirm the amounts but advised we can appeal it after we receive them. She/we are now in a blind panic and scared that this could be thousands. As there are 3 letters with different dates so do the penalties apply to all 3?

I’m basiclaly looking for some reassurance or advice, anything will help in pointing us in the right directions.

Thank you for your time :)

Posts: 61
Joined: Thu Dec 22, 2016 10:04 pm

Re: Underpaid tax

Postby D&C » Fri Nov 23, 2018 1:13 am

If she hasn't paid the tax then when her tax is reviewed each year it will just be an unpaid amount that moves on from one year to the next.

HMRC have legal restrictions on collecting tax underpayments like this and can ask people nicely to pay the tax but cannot really go much further than that i.e take her to court or send bailiffs round to her house.

But what they can do is issue her with a tax return and when she completes that with her income details it should, in theory, produce a Self Assessment tax bill of £79.60.

This Self Assessment bill can be legally enforced.

Note Self Assessment returns can be issued to anyone, they are not just for the self employed. Whether she works (on PAYE?) for a large company is irrelevant.

She seems to have got in a pickle by burying her head in the sand and it will only get worse if she doesn't sort this now.

Ideally what she needs to do is pay the £79.60 and persuade HMRC to withdraw the request for her to file a Self Assessment return. If there is no return required then there can be no penalty.

The other alternative is to file the return, pay the tax due (this will depend on what she enters on the return but should in theory be £79.60) and appeal against any penalties.

You need to establish how she wants to approach this but if she is going to try and persuade HMRC to withdraw the Self Assessment return then it would be sensible to actually pay HMRC the £79.60 first (if not there is little incentive for HMRC to cancel the request for a Self Assessment return).

There is a bit of assumption in the above, the main one being that she owes £79.60 for a single tax year and has been issued a single tax return for that particular tax year.

Feel free to add more detail if this isn't the case.

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