Taxpayers could refuse to pay tax demands

PEOPLE hit with an unexpected tax demand may be able to refuse to pay up, it was claimed today.

Experts have revealed HM Revenue & Customs 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.

It emerged that nearly six million people have paid the wrong amount of tax through the Pay As You Earn (PAYE) system.

Around 4.3m of these have paid too much and are due a refund, but 1.4m have underpaid and will have to hand over an average of £1,428 each.

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.

The latest round of errors date back to April 2008, meaning anyone who alerted HMRC to changes in the circumstances affecting their tax code before the start of the new tax year in April 2009 may be able to cite this clause.

Angela Beech, partner at chartered accountants Blick Rothenberg, said: “Those that receive these demands need to think before they automatically pay up.”

A total of £2 billion has been underpaid through the PAYE system over the past two years, while £1.8bn has been overpaid.

HMRC has begun sending out the first 45,000 letters to people who are affected.