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LITRG offers some tips to fill gloomy November evenings by reviewing your tax and tax credits affairs. Make sure you don’t miss deadlines or lose out on entitlements.
 

Introduction

LITRG’s tips to keep you occupied in reviewing your tax and tax credits are set out in four sections. First, PAYE taxpayers are advised what to do if they have received a ‘P800’ tax calculation saying they owe tax. Second, self-assessment tax return filers are given some pointers, particularly warning of the new penalty regime. Third, tax credits claimants are reminded about outstanding renewals. And finally, the introduction of new Junior ISAs for children’s savings is mentioned.

Note that when dealing with HMRC, always keep independent evidence of postage, copies of documents you send to them and notes of telephone calls.

1. PAYE taxpayers – have you received a ‘P800’ tax calculation?

HMRC’s automated process for issuing tax calculations to PAYE taxpayers who they think have not paid the correct tax in the year is now settling into its second year. Refunds for 2010/11 should have already been issued and the first ‘underpayment’ calculations (where HMRC think you have not paid enough tax) should be hitting doormats from the end of this week through to the end of the year.

Always check the calculation and ensure you are happy with it or query it with HMRC if you are in any doubt. Follow LITRG’s guidance to check yours, and to ensure you know your rights to challenge the calculation, where appropriate.

2. Self-assessment taxpayers – 2010/11 tax return pointers

a. Have you missed the 31 October paper filing deadline?

If you have not yet filed your paper return, the only way to avoid a fixed £100 penalty is by not filing on paper, but instead to file online by 31 January 2012.

Penalty rule changes this year mean that it is no longer possible to escape a fixed £100 fine if you file late, even if you pay all your tax on time or have nothing to pay.

b. Do you have a reasonable excuse for sending in a paper tax return late?

If you do submit a late paper return, you will be charged a penalty, but you might be able to appeal on the grounds that you had a reasonable excuse.

HMRC have a very restricted view of what constitutes a reasonable excuse. They will normally accept industrial action at the Post Office, loss of tax records through fire, flood or theft, serious illness which prevented you from dealing with your tax affairs (for example coma, heart attack, stroke or mental illness), or death or serious illness of a close relative or domestic partner.

However, HMRC’s guidance is only their view and is not conclusive. For example, a combination of factors might together make up an overall reasonable excuse. And if HMRC reject your appeal, you can appeal via their internal review system and/or to the tax tribunal.

c. What do you do when your ‘reasonable excuse’ ends?

You might be late with your return and the reason which made you miss the deadline is still causing you problems now. You should submit your return as soon as possible after the problem is resolved. It would also be useful to note in the ‘additional information’ section of the return why it is late.

d. How do you get your tax collected through PAYE?

If you have filed your return on paper, you had until the end of October to request for HMRC to collect your tax for 2010/11 through your 2012/13 PAYE code, provided the amount due is £2,000 or less. If you file online and you want your tax coded in this way, you need to submit it by 30 December 2011.

HMRC do now have power to collect up to £3,000 via PAYE. This will be reflected in self-assessment tax returns from 2011/12 onwards. If you owe between £2,000 and £3,000 for 2010/11, we understand that HMRC might be able to apply the higher limit if you would prefer your tax to be collected via PAYE. But you would need to contact them to ask if they can do this.

3. Tax credits

All tax credit claimants are required to renew their claim each year, most by completing ‘renewal’ forms or telephoning the helpline and giving or confirming details of their income and circumstances for the year just ended. This process finalises the claim for the year just ended and acts as a claim for the new tax year.

The principal deadline for renewing 2010/11 claims was 31 July 2011.

a. Did your renewal contain estimated figures? Confirm the actual details to HMRC

If, for example, you are self-employed, you may not have known your 2010/11 income by 31 July and therefore may have provided HMRC with an estimate. The date by which you must report final figures to HMRC is 31 January 2012, which fits in with the last self-assessment filing date for the self-employed.

If final figures are not sent in by 31 January, HMRC will finalise your 2010/11 claim using your earlier estimate. This may be incorrect and, as well as leading to an incorrect 2010/11 award, could also lead to your 2011/12 claim being wrong.

b. Have your tax credit payments stopped?

If HMRC did not receive your renewal papers or you did not renew by phone by 31 July 2011, it is likely that HMRC will have ended your claim and sent you a statement of account explaining that the payments have stopped and detailing any overpayment. Even if you don’t want to continue claiming, if you have received forms from HMRC you must complete them otherwise you may find yourself with an overpayment.

Normally, you have 30 days from the date on that statement of account to contact HMRC and have your claim reinstated. It is important to take immediate action if your payments stop by contacting the tax credit helpline on 0845 300 3900 (textphone 0845 300 3909). This year HMRC have confirmed they will extend the 30-day time limit to 60 days. Outside of this 60-day period you can still have your claim reinstated from 6 April 2011 if you had good cause for not renewing by the deadline provided you contact HMRC by 31 January 2012.

4. Junior ISAs – savings for children

Now that Child Trust Funds are no longer available for children born on or after 3 January 2011, a new tax-free investment – a ‘Junior Individual Savings Account’ (or ‘Junior ISA’) – has been introduced for young people. The Directgov website gives more information.