PAYE is back in the news again. The process of reconciliation has hit the headlines once more with the announcement that HMRC will be sending out 450,000 letters over the next three months notifying people of tax underpayments for the year 2007-8.
The CIOT and our Low Incomes Tax Reform Group (LITRG) have again been much in demand to explain what’s going on to the media and taxpaying public. John Andrews of LITRG, recent winner of a 'tax transparency award' has been featured in the Daily Mail and the BBC News Online website, commenting on the impact these reconciliations will have on those with low incomes, especially pensioners. Patrick Stevens, CIOT Vice-President, explained to 5 Live listeners last night what they should do if they receive a letter. Earlier in the day, John Whiting, CIOT Tax Policy Director, told Radio 2's 'Simon Mayo Drivetime' what was going on and why HMRC have undertaken these reconciliations.
LITRG, and John Andrews in particular, deserve great credit for persuading HMRC to write off underpayments for a great many pensioners. HMRC estimate that there are about 250,000 cases from 2008-09 and 2009-10 where a taxable state pension was paid by the DWP and the tax due on this pension should have been collected through a tax code adjustment, but wasn’t. These pensioners would have a very strong case for their underpayment to be written off in line with the ESC A19 concession. Rather than require them all to go through the bureaucratic process of claiming the concession, HMRC have agreed to write off all the relevant underpayments.
Information and guidance on what to do if you get a reconciliation letter for 2007-8 will be posted on the LITRG website in the next 24 hours. There is already guidance on the site for people who get 2008-9 and 2009-10 letters, the last few per cent of which are still going out.