September 10, 2010
As millions of Brits open their post this week to demands for unpaid tax, the government has softened the blow for those owing under £300 as a sign of goodwill.
Earlier this month, HM Revenue amp; Customs (HMRC) revealed that more than two million people had underpaid tax due to widespread errors made by HMRC officials. Initially, those owing were told to service their debts within a year despite not being at fault.
However, the government has announced that 40% of victims will be have their debts wiped while granting extensions to those owing larger sums.
Those owing less than £300 to HMRC will have their debts wiped completely, while those owing more will be given three years to respond, two more than was originally announced.
"In total the Exchequer is owed approximately £2bn. Being left with the worst deficit in peacetime history means we simply cannot afford to write off all of these underpayments,” announced Treasury Minister David Gauke.
"In cases of genuine hardship, HMRC will allow payments to be spread across a period of three years. As was already the case, HMRC will not pursue cases where the amount owed is for less than £300 – that's an increase from the previous threshold of £50 – and this applies to 40% of all underpayments."
Up to 900,000 taxpayers who underpaid in the past two years could benefit.
PAYE miscalculations for almost six million people were revealed last week, as the HMRC mistakenly under or over taxed between 2008 and 2010. Around 4.3m are due a refund worth £1.8bn, while 1.4m underpaid a total of £2bn and have to pay an average £1,428 each.
According to the HMRC, those owing less than £2,000 will have it deducted from salaries from April next year, while tax officials will individually contact those owing more than £2,000.
"Of course in specific circumstances HMRC will consider writing off underpayments where it can be shown that HMRC was provided with all the information necessary – although I have to tell the House that from historic experience, this is unlikely to apply to many cases and we do not want to build up people's hopes unrealistically," added Mr Gauke.
With a deluge of calls expected, HMRC call centre numbers have been increased and those unsure about payments or refunds should contact one immediately.
