General advice about previous year PAYE tax liabilities

You may have been hearing in the news about HMRC sending out letters advising people that they had underpaid or overpaid tax. Please note that there are no implications for business tax – the error applies to personal tax only and some six million people nationally are affected. The good news is that over 4 million of those can expect rebates – averaging £420 – because they have overpaid. But 1.4 million will receive letters saying they have to pay more. People most likely to be affected are those who failed to tell the HMRC about a change to their circumstances, such as starting a new job or receiving a new work benefit such as a company car.

The general advice is not to contact HMRC if you have not received a letter – they are issuing them from now to the end of January next year and if you haven’t received one, you’ve paid the right amount of tax. If you do get a letter and owe less than £2,000, your tax code will be altered from April 2011 so you’ll effectively be paying back in monthly instalments.

If you owe more than £2,000 you will receive a bill for a lump sum. There is a procedure called the extra statutory concession A19, which allows HMRC to write off tax, if it was provided with all the relevant information, but failed to use it within 12 months of the end of the tax year in which the information was received. Although few appeals succeed, HMRC will discuss payment arrangements on a case by case basis.

If you have any concerns and wish to discuss this or anything else to do with your business then please do get in touch.