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HMRC got it wrong? Landed you with a big unexpected tax bill?
See if you can possibly get your tax debt reduced legitimately
See if you can possibly get your tax debt reduced legitimately
ESC A19 – We all know about it now .... or do we?
The present problems –
HMRC has brought different computers and databases
together on to a new and improved computer system.
Was that really the one that issued all those incorrect
notices of coding?
As a result loads of underpayments and overpayments
for one or more back tax years will be dropping through
your door shortly.
Whatever happens when you get a buff (or nowadays
they can also be white just to throw you off the scent)
envelope telling you that you have overpaid tax or
underpaid tax, DO NOT file it in a drawer and forget
about it.
If the HMRC communication doesn’t show you the
reason for the tax overpaid or underpaid then write
back within 30 days and say “I cannot agree your
figures as I have not been provided with a narrative
(and quantified) explanation for the amount shown due
to/due by me. Please provide this detail within the next
21 days so that I may consider matters and in the
meantime note my provisional appeal against your
notices.”
Remember if they repay you tax incorrectly they can
still come along later and reclaim it back so repayments
and their basis are just as important as underpayments.
If you think about it HMRC have got it badly wrong in the
past so why should this time be any different. Protect
your wellbeing and check it out or get it checked out so
that you can sleep at nights.
ESC A19 –
The text of the extra statutory concession reads as
follows:
“A19. Giving up tax where there are Revenue
delays in using information
Arrears of income tax or capital gains tax may be given
up if they result from the Inland Revenue's failure to
make proper and timely use of information supplied
by:
a taxpayer about his or her own income, gains or
personal circumstances
an employer, where the information affects a
taxpayer's coding; or
the Department for Work and Pensions, about a
taxpayer's State retirement, disability or widow's pension.
Tax will normally be given up only where the
taxpayer:
could reasonably have believed that his or her tax affairs
were in order, and
was notified of the arrears more than 12 months after
the end of the tax year in which the Inland Revenue
received the information indicating that more tax was
due, or
was notified of an over-repayment after the end of the
tax year following the year in which the repayment was
made.
In exceptional circumstances arrears of tax notified 12
months or less after the end of the relevant tax year
may be given up if the Revenue failed more than once
to make proper use of the facts they had been given
about one source of income or
allowed the arrears to build up over two whole tax years
in succession by failing to make proper and timely use
of information they had been given.”
BUT remember that ESC A19 is not limited to PAYE
taxpayers it can also apply to SA and self employed
taxpayers
Consideration of your problem –
Ok so let’s assume that the figures are correct and you
are told that you owe unpaid tax.
If it’s over £2K you will have to repay it in one sum by
5th April 2012. - Can you afford that?
If it’s under £2K then HMRC will automatically collect the
underpayment (possibly over 12 months starting in April
2011). - Can you afford for your monthly income to be
reduced by 1/12th of the underpayment per month for a
year?
What can you do about it? Well everybody will have
heard the media reference to the ESCA19 loophole. I
think that they use the word loophole to make their
report more intriguing but there is no loophole. It is what
is called an extra statutory concession. This just means
that while it is not in the taxing statute HMRC will follow
the concession if your circumstances fit into the required
template.
Tax practitioners will be well aware of the previous ESC
that said that when you were day counting for residence
purposes as laid out in the then IR20 booklet –
“guidance on residence and domicile matters-“ you
ignored the days of arrival in and departure from the
UK. Remember how quickly they changed that when Mr
Gaines-Cooper was seen by HMRC to be exploiting their
concession.
I wonder if the Treasury will soon be thinking about
tightening up ESC A19.
Anyway if you read HMRC’s website you will soon gather
that it is not going to be so easy to get your tax debt
written off by means of the Extra Statutory Concession
A19.
The text of HMRC starts off at
http://www.hmrc.gov.uk/esc/esc.htm
“If you think that HM Revenue & Customs (HMRC)
should have already collected the tax due in your Tax
Calculation (P800) because the information had already
been provided to it and HMRC have failed or delayed to
use this information, then in some limited circumstances
(my underlining) HMRC may agree not to collect it.”
So for a start it is not going to be in every case where
HMRC have failed or delayed to use information
provided to it that the concession will be applied.
The words “limited circumstances” show that you are
going to have to jump through loads of hoops and
persevere against the odds.
The taxpayer therefore has to consider whether the
amount at stake is sufficient to engage the services of
the tax adviser.
Then if he gets over that hurdle he has to balance the
chances of getting the debts written off; the amount of
those debts; the time that it will take and worst of all the
fees that he is going to have to spend to get his/her
proper justice.
Of course there also can be no guarantee that what you
see as a justified write off will be accepted by HMRC.
If not successful he/she might then have to escalate
matters to their MP, or Adjudicator or Parliamentary
Ombudsman. It always therefore involves time and
stress and worst of all further costs.
The present problems –
HMRC has brought different computers and databases
together on to a new and improved computer system.
Was that really the one that issued all those incorrect
notices of coding?
As a result loads of underpayments and overpayments
for one or more back tax years will be dropping through
your door shortly.
Whatever happens when you get a buff (or nowadays
they can also be white just to throw you off the scent)
envelope telling you that you have overpaid tax or
underpaid tax, DO NOT file it in a drawer and forget
about it.
If the HMRC communication doesn’t show you the
reason for the tax overpaid or underpaid then write
back within 30 days and say “I cannot agree your
figures as I have not been provided with a narrative
(and quantified) explanation for the amount shown due
to/due by me. Please provide this detail within the next
21 days so that I may consider matters and in the
meantime note my provisional appeal against your
notices.”
Remember if they repay you tax incorrectly they can
still come along later and reclaim it back so repayments
and their basis are just as important as underpayments.
If you think about it HMRC have got it badly wrong in the
past so why should this time be any different. Protect
your wellbeing and check it out or get it checked out so
that you can sleep at nights.
ESC A19 –
The text of the extra statutory concession reads as
follows:
“A19. Giving up tax where there are Revenue
delays in using information
Arrears of income tax or capital gains tax may be given
up if they result from the Inland Revenue's failure to
make proper and timely use of information supplied
by:
a taxpayer about his or her own income, gains or
personal circumstances
an employer, where the information affects a
taxpayer's coding; or
the Department for Work and Pensions, about a
taxpayer's State retirement, disability or widow's pension.
Tax will normally be given up only where the
taxpayer:
could reasonably have believed that his or her tax affairs
were in order, and
was notified of the arrears more than 12 months after
the end of the tax year in which the Inland Revenue
received the information indicating that more tax was
due, or
was notified of an over-repayment after the end of the
tax year following the year in which the repayment was
made.
In exceptional circumstances arrears of tax notified 12
months or less after the end of the relevant tax year
may be given up if the Revenue failed more than once
to make proper use of the facts they had been given
about one source of income or
allowed the arrears to build up over two whole tax years
in succession by failing to make proper and timely use
of information they had been given.”
BUT remember that ESC A19 is not limited to PAYE
taxpayers it can also apply to SA and self employed
taxpayers
Consideration of your problem –
Ok so let’s assume that the figures are correct and you
are told that you owe unpaid tax.
If it’s over £2K you will have to repay it in one sum by
5th April 2012. - Can you afford that?
If it’s under £2K then HMRC will automatically collect the
underpayment (possibly over 12 months starting in April
2011). - Can you afford for your monthly income to be
reduced by 1/12th of the underpayment per month for a
year?
What can you do about it? Well everybody will have
heard the media reference to the ESCA19 loophole. I
think that they use the word loophole to make their
report more intriguing but there is no loophole. It is what
is called an extra statutory concession. This just means
that while it is not in the taxing statute HMRC will follow
the concession if your circumstances fit into the required
template.
Tax practitioners will be well aware of the previous ESC
that said that when you were day counting for residence
purposes as laid out in the then IR20 booklet –
“guidance on residence and domicile matters-“ you
ignored the days of arrival in and departure from the
UK. Remember how quickly they changed that when Mr
Gaines-Cooper was seen by HMRC to be exploiting their
concession.
I wonder if the Treasury will soon be thinking about
tightening up ESC A19.
Anyway if you read HMRC’s website you will soon gather
that it is not going to be so easy to get your tax debt
written off by means of the Extra Statutory Concession
A19.
The text of HMRC starts off at
http://www.hmrc.gov.uk/esc/esc.htm
“If you think that HM Revenue & Customs (HMRC)
should have already collected the tax due in your Tax
Calculation (P800) because the information had already
been provided to it and HMRC have failed or delayed to
use this information, then in some limited circumstances
(my underlining) HMRC may agree not to collect it.”
So for a start it is not going to be in every case where
HMRC have failed or delayed to use information
provided to it that the concession will be applied.
The words “limited circumstances” show that you are
going to have to jump through loads of hoops and
persevere against the odds.
The taxpayer therefore has to consider whether the
amount at stake is sufficient to engage the services of
the tax adviser.
Then if he gets over that hurdle he has to balance the
chances of getting the debts written off; the amount of
those debts; the time that it will take and worst of all the
fees that he is going to have to spend to get his/her
proper justice.
Of course there also can be no guarantee that what you
see as a justified write off will be accepted by HMRC.
If not successful he/she might then have to escalate
matters to their MP, or Adjudicator or Parliamentary
Ombudsman. It always therefore involves time and
stress and worst of all further costs.
However once they have overcome all those uncertainties
what needs to be shown (or should I say proved) as no
doubt HMRC will be giving their troops handouts or such
to help them refute the “invalid applications”.
Conditions -
1. Time Limits
a. Firstly HMRC have to have failed to use information
provided to them within a period of 12 months after the
end of the tax year in which the information was provided.
b. So information provided at any time up to the 5th
April 2009 needs to have not been properly used by 6th
April 2010.
c. Any information provided after 6th April 2009 can
therefore be used by them at any time up to 5th April
2011 with no chance of ESC A19 applying.
d. The same time limits apply for any over-repayment
of tax that is made in error and HMRC asks for the tax to
be paid back.
e. See however “Exceptional Circumstances” below
for ESC A19 in successive years.
2. What sort of information would need to have been
supplied earlier?
a. The list below shows information that HMRC would
normally use to adjust your tax code to make sure you pay
the right amount of tax:
• details of a change in income
• a new job or additional job
• a taxable benefit provided by your employer, for
example a company car
• start receiving a work or private pension
• receipt of state retirement, disability or widow’s
pension
This list is not exhaustive and each case will be treated on
its own set of circumstances.
BUT if no information has been supplied then ESC A19
cannot apply
3. Who should have supplied the information?
a. This information can come from a variety of sources
i. you,
ii. your agent,
iii. your employer (if you were an employee) – But
remember ESC A19 can also apply to SA taxpayers - or
iv. the Department of Work and Pensions.
b. So clearly you would need to have proof that
i. the information was either provided by yourself or
ii. you would have to have knowledge and evidence
that another party provided the information to HMRC at
the appropriate time
4. Exceptional Circumstances
In exceptional circumstances, arrears notified less than 12
months after the end of the relevant tax year may be
considered where both of the following apply:
a. HMRC failed to make proper use of more than one
piece of information received about a source of income
b. HMRC allowed tax arrears to build up over two
whole tax years in succession – so at least two tax year
underpayments are due
So that if for example HMRC notify you of only one year’s
unpaid tax at this time it would be worth considering if the
same situation existed for a later or earlier year and use
this opportunity to bring all unpaid duties within the ESC.
5. Reasonable belief that your tax affairs were in order
a. Lastly comes the most difficult condition namely
i. HMRC will consider the facts and circumstances of
any claim that this concession should apply and
ii. decide whether it was reasonable for you to believe
(prior to receiving the Tax Calculation) that your tax affairs
were in order.
b. This therefore shows that an officer who may have
been involved in not making use of information has to sit
down and admit that they got it wrong.
It therefore requires judgment and an individual HMRC
officer will inevitably have a differing standard of what is
needed to show something and also may well not believe
that it was reasonable even though everybody else does.
As HMRC’s internal guidance instructions to their staff
says:-
“ The important point to remember is
• Not whether the taxpayer ‘believed’ their tax
affairs were in order
But
• Whether it was reasonable for them to ‘hold
the belief’ that they were
It is not the first time that I have seen HMRC officers
interpreting reasonableness in a different way to other
beings and the instruction requires HMRC staff to make a
judgment twice.
Not only whether the taxpayer truly or reasonably believed
their affairs were in order
BUT
also whether it was reasonable for them to hold that belief.
Wow what scope for taking a hard and questioning view!!.
Look out for the looking at matters from a completely
different perspective.
6. Making a claim
Finally if after all that you think that you are entitled to
make a claim HMRC’s advice says :
a. “If you think this concession applies to you, then
you need to telephone HMRC on 0845 300 0627
indicating that you are making a claim under ‘ESC A19’.
b. And therein lies the next pitfall – How often have
you tried to get through to HMRC on the telephone.
c. Granted agents have dedicated lines however what
about the poor taxpayer who is left to phone the above
number that will inevitably be a call centre operative.
d. However if you do phone remember and record the
name of the person taking your message and the time of
the call.
e. Also make out a short note for yourself prior to the
call of the information below and during the call - the detail
of your discussion(s)
f. I would recommend putting any claim in
writing and providing the following information:
• what tax year and underpayment the claim relates to
• what information HMRC failed to make proper and
timely use of and any supporting information
• what date this information was provided
• reason(s) why you thought your tax affairs were in
order prior to receiving the Tax Calculation
Then of course HMRC will consider your claim but may
need to verify details with you before giving you a decision.
Finally in their guidance they make a prominent note of
“Please note that there is no legal right of appeal but you
can ask for another officer to review the decision made.
If you still believe that you should not have to pay the tax
after a second review decision has been provided, please
read ‘How to Complain to HMRC’ to decide if your case
has not been dealt with properly.”
Of course by that time you have come to the end of the
road unless you have the steel (and monies) to pursue it
all the way to MP’s and/or Adjudicators.
Remember Bill & Vicky know what went on behind closed
doors so get their secrets to help you
By way of a supplementary aid I would also say that if you
are unsure about the process and/or any case please feel
free to contact Vicky on 07899913414 or Bill on
07751720507 who will be able and prepared to assist.
Remember that if you have unfortunately forgotten
to advise HMRC regarding some sources of income
or taxable amounts then please contact Vicky or Bill
for a confidential chat before doing anything
what needs to be shown (or should I say proved) as no
doubt HMRC will be giving their troops handouts or such
to help them refute the “invalid applications”.
Conditions -
1. Time Limits
a. Firstly HMRC have to have failed to use information
provided to them within a period of 12 months after the
end of the tax year in which the information was provided.
b. So information provided at any time up to the 5th
April 2009 needs to have not been properly used by 6th
April 2010.
c. Any information provided after 6th April 2009 can
therefore be used by them at any time up to 5th April
2011 with no chance of ESC A19 applying.
d. The same time limits apply for any over-repayment
of tax that is made in error and HMRC asks for the tax to
be paid back.
e. See however “Exceptional Circumstances” below
for ESC A19 in successive years.
2. What sort of information would need to have been
supplied earlier?
a. The list below shows information that HMRC would
normally use to adjust your tax code to make sure you pay
the right amount of tax:
• details of a change in income
• a new job or additional job
• a taxable benefit provided by your employer, for
example a company car
• start receiving a work or private pension
• receipt of state retirement, disability or widow’s
pension
This list is not exhaustive and each case will be treated on
its own set of circumstances.
BUT if no information has been supplied then ESC A19
cannot apply
3. Who should have supplied the information?
a. This information can come from a variety of sources
i. you,
ii. your agent,
iii. your employer (if you were an employee) – But
remember ESC A19 can also apply to SA taxpayers - or
iv. the Department of Work and Pensions.
b. So clearly you would need to have proof that
i. the information was either provided by yourself or
ii. you would have to have knowledge and evidence
that another party provided the information to HMRC at
the appropriate time
4. Exceptional Circumstances
In exceptional circumstances, arrears notified less than 12
months after the end of the relevant tax year may be
considered where both of the following apply:
a. HMRC failed to make proper use of more than one
piece of information received about a source of income
b. HMRC allowed tax arrears to build up over two
whole tax years in succession – so at least two tax year
underpayments are due
So that if for example HMRC notify you of only one year’s
unpaid tax at this time it would be worth considering if the
same situation existed for a later or earlier year and use
this opportunity to bring all unpaid duties within the ESC.
5. Reasonable belief that your tax affairs were in order
a. Lastly comes the most difficult condition namely
i. HMRC will consider the facts and circumstances of
any claim that this concession should apply and
ii. decide whether it was reasonable for you to believe
(prior to receiving the Tax Calculation) that your tax affairs
were in order.
b. This therefore shows that an officer who may have
been involved in not making use of information has to sit
down and admit that they got it wrong.
It therefore requires judgment and an individual HMRC
officer will inevitably have a differing standard of what is
needed to show something and also may well not believe
that it was reasonable even though everybody else does.
As HMRC’s internal guidance instructions to their staff
says:-
“ The important point to remember is
• Not whether the taxpayer ‘believed’ their tax
affairs were in order
But
• Whether it was reasonable for them to ‘hold
the belief’ that they were
It is not the first time that I have seen HMRC officers
interpreting reasonableness in a different way to other
beings and the instruction requires HMRC staff to make a
judgment twice.
Not only whether the taxpayer truly or reasonably believed
their affairs were in order
BUT
also whether it was reasonable for them to hold that belief.
Wow what scope for taking a hard and questioning view!!.
Look out for the looking at matters from a completely
different perspective.
6. Making a claim
Finally if after all that you think that you are entitled to
make a claim HMRC’s advice says :
a. “If you think this concession applies to you, then
you need to telephone HMRC on 0845 300 0627
indicating that you are making a claim under ‘ESC A19’.
b. And therein lies the next pitfall – How often have
you tried to get through to HMRC on the telephone.
c. Granted agents have dedicated lines however what
about the poor taxpayer who is left to phone the above
number that will inevitably be a call centre operative.
d. However if you do phone remember and record the
name of the person taking your message and the time of
the call.
e. Also make out a short note for yourself prior to the
call of the information below and during the call - the detail
of your discussion(s)
f. I would recommend putting any claim in
writing and providing the following information:
• what tax year and underpayment the claim relates to
• what information HMRC failed to make proper and
timely use of and any supporting information
• what date this information was provided
• reason(s) why you thought your tax affairs were in
order prior to receiving the Tax Calculation
Then of course HMRC will consider your claim but may
need to verify details with you before giving you a decision.
Finally in their guidance they make a prominent note of
“Please note that there is no legal right of appeal but you
can ask for another officer to review the decision made.
If you still believe that you should not have to pay the tax
after a second review decision has been provided, please
read ‘How to Complain to HMRC’ to decide if your case
has not been dealt with properly.”
Of course by that time you have come to the end of the
road unless you have the steel (and monies) to pursue it
all the way to MP’s and/or Adjudicators.
Remember Bill & Vicky know what went on behind closed
doors so get their secrets to help you
By way of a supplementary aid I would also say that if you
are unsure about the process and/or any case please feel
free to contact Vicky on 07899913414 or Bill on
07751720507 who will be able and prepared to assist.
Remember that if you have unfortunately forgotten
to advise HMRC regarding some sources of income
or taxable amounts then please contact Vicky or Bill
for a confidential chat before doing anything
| Extra Statutory Concession A19 |
Article by Bill |