The Daily Telegraph - Saturday - Money
Error code Which HMRC web guidance is out of date?
Raising a dispute with the taxman over your bill can be confusing and some cases still take years to resolve, reports Sam Meadows
The taxman’s record in dealing with taxpayer disputes is being put under the spotlight by MPs. The Treasury sub-committee, led by former education secretary Nicky Morgan, announced the investigation this week, inviting evidence on this and two other tax inquiries.
The inquiry will chiefly focus on disputes over tax returns, but there are many other occasions when taxpayers run into trouble and disagree with HM Revenue and Customs’ calculations of what they owe. Individual cases will not be assessed, but the inquiry will raise questions as to the fairness and proportionality of HMRC’s response to complaints.
Telegraph Money has reported extensively in the past on ordinary individuals’ dealings with the taxman and the sometimes less than satisfactory responses received. Those seeking advice on complex, littleunderstood taxes such as the stamp duty surcharge have faced a struggle to obtain any information at all, and when advice is received, it can be contradictory or unhelpful.
If you disagree with what the taxman says you owe, it can be even more difficult to get a resolution.
Launching the sub-committee’s inquiry, Labour MP John Mann said: “The committee often receives representations from people who feel that HMRC’s inquiry process treats them unfairly. Some have accused HMRC of offering more advantageous terms of settlement to big business than small businesses or individual taxpayers receive.
“There are concerns about the extent to which HMRC balances its responsibility to collect the right amount of tax due against its obligations to administer the tax system fairly and even-handedly.”
One group that feels it has been unfairly treated is contractors who used the now-controversial loan arrangements to lessen their tax liabilities. Similar schemes were used by Scottish football club Rangers, helping bring about their collapse.
Following a long-running court battle that concluded last year, those who used the arrangements face huge bills for unpaid tax, often six figures, dating back years. But those affected say HMRC has been unhelpful as they attempt to settle their liabilities. Some also say the calculation of their bills appears to differ from others in the same situation.
The schemes were widely accepted as being legal at the time, and most of those involved even declared the arrangements on their tax returns.
One IT contractor used a scheme for five years, and now faces a bill for more than £100,000 in tax and penalty charges. He said he has written to HMRC 37 times since the beginning of last year in an attempt to query the calculations before he settled, but has not received the answers he needs to do so.
“They haven’t answered any of my queries, they’ve just given me standard responses they give to everyone,” he said. “I want to settle the money I owe but I want to know the facts first. There are so many things which are up in the air.
“I’ve heard some people on some schemes are not being charged National Insurance, while I am.”
The wife of another IT contractor who spent six years in a loan scheme and now faces a bill for almost £150,000 said others she knew of had been treated differently by the taxman despite using the same arrangement.
“My brother-in-law settled because he had the money to be able to, and then received a refund for National Insurance contributions. Someone else I know did the same and received nothing,” she said. “We have been unable to settle and now the interest is racking up.
“We filled in our tax return every year and actually received refunds in some tax years – now we are facing this.”
Others who have found getting answers from the taxman difficult include those who have issues with their tax code.
Last year, Telegraph Money reported the story of 83-year-old John Doe, who was told he had underpaid tax by 7p, and that HMRC would “start to collect this straight away”. The taxman eventually said it would waive the figure as it was too small.
This year Mr Doe says that again he has been sent an incorrect tax code due to mistakes made when calculating the increase e of his pension income.
“Last year I complained ned to them and went to the arbitrator and then they y have made a mess of it again,” he said.
Tom Wallace, of WTT T Consulting, said the biggest ggest problems with HMRC’s disputes process were the he length of time they could ld take and their “one-sizeefits-all” approach. He said aid he had clients who had been under inquiry for five years “with no end in sight” and suggested that an 18-month deadline should be imposed.
“Disputes are a big problem for HMRC,” he said. “I think they have perhaps lost their way. You get to the point where they don’t seem to realise their remit is to collect the right tax, not the most tax. They need to take a more pragmatic approach to settlements for individuals and small businesses.”
HMRC disputed the Treasury sub-committee’s claims about preferential treatment for big business. A spokesman said: “HMRC never does sweetheart deals and subjects large businesses to an exceptional level of scrutiny, actively investigating more than half of the UK’s largest businesses at any one time.
“Last year alone HMRC secured £8bn in additional funding for our vital public services by intervening to make sure large businesses play by the rules.
“In addition, since 2010 we have secured around £2.5bn from tackling offshore tax dodgers. The UK’s tax gap is down to 6pc – its
‘They don’t seem to realise their remit is to collect the right tax, not the most tax’ ‘I wrote to HMRC 37 times this year. They haven’t answered any of my questions’
lowest level ever, and one of the lowest in the world.”
The deadline for submissions to the inquiry is May 31.
How to challenge the taxman’s calculations
If you disagree with HMRC’s conclusion as to how much tax you owe there are official avenues you can take. Citizens Advice has a guide on how to do this. In the first instance contact HMRC and let them know there’s a problem. If this doesn’t help, speak to an independent adviser. Charities such as TaxAid and Tax Help for Older People can provide free support. The next step would w be to appeal, for example ex against a tax liability o or code, to HMRC. You could al also seek a waiver if there hav have been delays in dealing with wi your case, or complain about HMRC’s conduct i if it hasn’t been up to scratch scratch. If you have exper experienced delays, erro errors or discourtesy you can also com complain to the Ad Adjudicator’s Office or the Parliamentary and an Health Service O Ombudsman.