Tax underpayment amnesty for those owing under 300


Tax underpayment amnesty for those owing under 300

Treasury writes off debt of 40% of underpayers, while those owing more could have up to three years to pay
As part of an effort to sort out anomalies in the past collection of tax, anyone who has been undercharged up to 300 in the past six tax years will have it written off, while those who owe more than 300 could have up to three years to pay.

Treasury minister David Gauke said today in a statement in the Commons: "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 …

"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."

This could mean up to 900,000 taxpayers who underpaid in the past two years could benefit. On Friday the Revenue admitted it had made mistakes in collecting tax by PAYE from nearly 6m people for 2008/09 and 2009/10. 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.

The Revenue said today those who owe 300 or less were not included in these totals, so the 40% benefiting from a write-off would be in addition to the 1.4m quoted as underpaying. Those owing less than 2,000 will have it deducted from salaries from April, and tax officials will individually contact those owing more than 2,000.

However, it emerged this week there are more than 17m unreconciled cases dating back to the 2004/05 tax year.

Gauke added: "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."

The waiver for those owing 300 or less will particularly help those on low incomes. John Whiting, tax policy director with the Chartered Institute of Taxation, said: "This is a pragmatic approach from the government, though it raises further questions. For example, what about people who have been told previously by HMRC that they owe between 50 and 300? Will the new threshold apply to them too?

"The minister's announcement that there will be extra call centre staff is particularly welcome. It is something we have called for – lots of people will have lots of questions for the taxman. It is important that they have access to the help and advice they need."