A Midlands accountant has hit out at the “shocking” way Her Majesty’s Revenue and Customs is holding back on overpaid tax.
Simon Littlejohns, tax partner at PKF in Birmingham, is also concerned at arrangements by which the Revenue is seeking to cut the deadline for claims on money owed.
The fear is that it does not give people enough time to find and rectify Revenue mistakes.
Mr Littlejohns said that though HMRC can in certain circumstances chase six years of back tax, they now want to reduce their obligations in the other direction down to four years – even where the repayments are due to their own errors.
He acknowledges that HMRC have taken a balanced approach in only being able to go back and make a “discovery” – where a taxpayer has made a mistake – for four years, down from six. The six-year look back concerns “failure to take reasonable care” – albeit a major reduction from the current 20 years for “negligence”.
Nevertheless he has called on MPs to take notice.
His worry is that, while the time limits are being aligned and simplified, four years may simply not be enough for a taxpayer to find and rectify a mistake.
He said: “We may be perhaps halfway into that period by the time a return has been filed and statements issued.
“On the other hand HMRC is in a far better position – having lots of data available to it if only it was all considered together – to find these things more quickly.”
The changes are due to go through in the forthcoming Finance Bill and legislation expected next month. There is no proposed time limit for taxpayers to make claims where HMRC has failed to take “reasonable care”.
Mr Littlejohns says that by aligning the taxpayers time limit at four years, the proposals effectively assume that HMRC will never make major systematic mistakes: this has not proved to be the case in recent years.
His comments came on the back of strong words from John Andrews, of the Low Incomes Tax Reform Group.
Writing in Mature Times, a monthly newspaper for the over-50s market, Mr Andrews noted that HMRC held a wealth of data about taxpayers on file, but this was not always married together.
“If it were to be amalgamated under individual taxpayer records, HMRC may well discover that large numbers of people have paid too much,” said Mr Andrews.
“Most people believe that HMRC check every year to see if you have overpaid tax – and if you have, an automatic repayment will come your way. Unfortunately this is not the case.
“Some efforts are being made to change, but HMRC’s data sources reach far wider than PAYE. For instance, they receive information from the banks about interest on individuals’ accounts. We know that HMRC intend to use this information to write to thousands of customers across the country where they believe that not enough tax has been paid on bank interest.
“But what about those for whom matched records indicate that too much tax has been paid? Will they receive a refund from HMRC? It does not look like it – and we expect the reason to be a ‘lack of resources’. In fact, it will be a lack of will.”
Low-income taxpayers can pay too much tax for a variety of reasons, including incorrect PAYE codes, by not claiming additional personal allowances, such as age allowance, blind person’s allowance or married couple’s allowance, and through having 20 per cent tax deducted at source on savings interest.
According to the charity TaxHelp for Older People, the average claim is £1,963 for the current six-year period – an average of £327 a year.
The highest claim was for £5,200. Most were in the region of £1,000 to £2,000.