These days there is a massive emphasis on those paying taxes ensuring that all of the details they provide to HMRC are correct. However, what about HM Revenue & Customs? Surely they cannot always be right?
With the administration and collection of tax becoming more and more complex over recent years, HMRC is increasingly making mistakes. It simply cannot keep up with the number of changes which have been made and with staff relocating and offices amalgamating it is difficult to know who is dealing with what. Whilst most people will highlight errors where they have been assessed to pay more tax, how forthcoming should taxpayers be when HMRC has undercharged them?
The answer that most people would want to hear is that they can keep the money. Why not? It’s HMRC’s error after all, so they should be made to pay. They’d be quick enough to claw it back if they knew, right?
Unfortunately, things are not so simple. The instances of undetected errors are on the increase with HMRC, despite moves to plug holes. This was shown recently where HMRC requested tax refunds already paid back to over a million tax payers due to PAYE coding errors.
This caused outrage at the time, but HMRC were within their rights to come back for this money, even though it was their error which caused the problem. This clearly shows that HMRC can and will try to recoup any tax refunded in error.
Put simply, if the taxpayer is aware that HMRC has overpaid them in error, keeping the money may be tantamount to theft within the Theft Act 1968. Of course this is an extreme example and in practice criminal action would be unlikely unless a serious breach or theft had been carried out.
But how many taxpayers will know whether a repayment is correct or not without assistance? The sad truth is that tax is not an easy subject to understand. With the number of Finance Acts introduced since the credit crunch in 2008 increasing, even the most learned adviser can have problems knowing what is current and what is old law.
If in any doubt about why a repayment has been issued unexpectedly, the taxpayer should contact HMRC in the first instance to see why they have received it. There have been instances where this has assisted the taxpayer in the latter stages of correspondence. If the taxpayer takes steps to get to the bottom of what is essentially an HMRC error, then it would be difficult to argue that they intended to defraud the Treasury.
Article written by Christine Roache, who is expecting a tax rebate.
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