Taxman starts to redress blunder

The first wave of millions of taxpayers caught up in a massive blunder will start to learn if they are in credit or if they owe money to the revenue today.

Due to an error by  HM Revenue & Customs, around 5.7 million people paid either too much or too little income tax through the Pay As You Earn (PAYE) system.

As many as 1.4 million people have not been paying enough tax and will have to repay an average of £1,428, while about 4.3 million have paid too much and are due a refund.

The first 45,000 letters have been sent to a selection of those affected, around two thirds of whom are due a rebate, while the remainder have underpaid.

Between now and Christmas the rest of the people who have been hit by the error will be contacted.

Experts said people hit with an unexpected tax demand may be able to refuse to pay up as HMRC could have exceeded its own time limits in which to ask for the money.

Under tax rules HMRC must issue demands for underpaid tax within 12 months of the end of the tax year in which it became aware that people had underpaid.

But if people provided HMRC with all the information they needed to get their tax code right, it should have used this information within 12 months of the end of the tax year in which it was received to claw back the extra money.

If HMRC failed to do this, taxpayers can ask for an Extra Statutory Concession, also known as an ESC A19.

Copyright Press Association 2010

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