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CIOT: Tax experts issue guide to PAYE tax calculations

The Low Incomes Tax Reform Group have issued a comprehensive guide to enable taxpayers who receive letters from HMRC informing them they have underpaid or overpaid tax in the 2011-12 tax year to check their calculations and take action, where appropriate.

In the middle of May, HMRC started sending out the first PAYE calculations for 2011-12, some of which will now have hit taxpayers’ doormats and could be causing concern.

Last year, HMRC started their annual reconciliation of PAYE taxpayers’ affairs by sending out refunds, then moved on later to notifying those they believed had not paid enough tax. But this year, the underpayment and overpayment calculations are being dealt with together.

Anyone who receives one, be it a refund or a notification that HMRC believe extra tax is owed, should be proactive in checking it.

LITRG’s full guide is available to help with this and can be accessed via the link: http://www.litrg.org.uk/News/2012/paye-calc-2012

The guide includes:
· How to check the calculation
· Examples of the letters taxpayers could write in response to receipt of a tax calculation
· A guide to ESC A19, an Extra-Statutory Concession under which HMRC will sometimes write off arrears of tax
· A guide to when HMRC should investigate whether someone’s employer or pension payer should be asked to pay tax arrears rather than them
· A guide to when someone can challenge an underpayment shown on a PAYE tax calculation where they feel HMRC have given them misleading or incorrect information or advice

Introducing the guide, LITRG’s chairman, Anthony Thomas, said:

“People receiving tax calculations from HMRC should always check they are correct. In the last two years, LITRG’s guidance has helped thousands of taxpayers to do just that, and to have underpayments written off, where appropriate. For 2011-12, most people being notified of underpaid tax will have to pay but there might be some instances where employers, pension providers or HMRC have made errors where there is a case for challenging the calculation.

“But the key message is that all calculations should be checked and action taken relevant to the individual circumstances, as taxpayers could be missing out on claims. If people do owe tax, they should investigate their payment options and those on low incomes should check whether it has any effect on their entitlement to means-tested benefits.”

Notes to editors

1. According to HMRC, the PAYE reconciliations process for 2011-12 could generate up to 3.5 million refunds averaging £379 and up to 1.6 million underpayments averaging £537.

2. Reconciliations are not necessarily caused due to errors in the system. (See LITRG’s previous article: http://www.litrg.org.uk/News/2012/tax-rec-not-err) However, in a limited number of cases, errors could have been made, which may give cause for challenging the calculations. Individuals are advised to review their circumstances carefully, with the help of a tax professional if necessary.

3. LITRG are keen for their guidance to have the widest possible circulation and media outlets are encouraged to link to it and to reproduce extracts from it, provided these are attributed to LITRG.

4. Experts from LITRG are available for interview or to provide background information. Please contact them via the contact details at the top of the page.

5. The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.

6. The CIOT is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT’s primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it – taxpayers, advisers and the authorities. The CIOT’s 16,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’.

George Crozier
External Relations Manager

D: +44 (0)20 7340 0569
M: +44 (0)7740 477374
The Chartered Institute of Taxation
Registered charity number 1037771

The Association of Taxation Technicians
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Low Incomes Tax Reform Group - an initiative of the Chartered Institute of Taxation

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