This Content Was Last Updated on November 5, 2015 by Jessica Garbett


During the 2012/13 tax year over one million taxpayers received notification of a tax underpayment. Many taxpayers are still trying to engage with HMRC in relation to earlier year underpayments. But who, or what, caused it to happen in the first place? One thing is for sure – someone or something did! Unfortunately, we live in a world where staffing is being reduced, and reliance on computers has become the norm and HMRC are no exception. It has become expensive to complete even the simplest of changes and often there is no one with the time to investigate the cause of a problem.

It is not just an HMRC problem; those of you who tune into BBC’s Watchdog will have realised that most companies, especially the larger ones, have procedures in place that guide their customers and clients on how to appeal, ask for investigations and to complain. Again, HMRC is no different. Don’t be daunted, you are being asked to part with your hard-earned money. You have a right to have your questions answered before doing so.

If you are within the pay as you earn system (PAYE), after checking that the figures on your tax calculation are correct, do try to understand why you did not pay enough tax. This is important in working out whether you fall into one of the limited situations in which you can argue that you should not have to pay the bill. Then ask yourself these two questions:-

1 – Did my employer or pension provider make a mistake?

It is possible that the underpayment has arisen due to your employer or pension payer not operating PAYE correctly. For example, they may not have applied the tax code that HMRC sent to them. If this is the case, HMRC should first seek the tax due from the employer or pension payer, not from you.

2 – Did HMRC make a mistake or fail to use information to get my tax right?

The underpayment could have arisen because HMRC have failed to make timely use of information about you which they have had in their possession. In such cases, you can consider asking HMRC to write off (that is, not to charge you) the tax under their Extra-Statutory Concession A19 (ESC A19).

But note that ESC A19 usually only applies to underpayments for tax years ending more than 12 months ago – for example, you cannot normally use ESC A19 to ask for tax owing for 2012/13 to be written off if HMRC are advising you of the underpayment in, say, October 2013. However, do ask if you have been receiving notices of underpayments for more than one year.

*Important note* If HMRC are insistent that you start paying immediately, do not repay the tax in full (as HMRC will then argue that ESC A19 cannot apply as there are no arrears of tax to write off). If you do agree to start making payments towards it, make it clear in writing that these are only ‘on account’ and that you expect them to be repaid to you if your claim is eventually agreed.

Comprehensive information can be found on the Low Income Tax Reform Group website

This article is by Tax Help for Older People (operated by registered charity no 1102276), offering free tax advice to older people on incomes below £17,000 a year. The Helpline number is 0845 601 3321 or geographical 01308 488066