Opinion Former Article

CIOT: Benefits claimants urged to challenge tax demands

HMRC recently agreed not to collect PAYE tax underpayments from many state pensioners. They have now agreed to extend the same concession to claimants of other taxable state benefits.

The Low Incomes Tax Reform Group (LITRG) is urging affected individuals to contact HM Revenue and Customs (HMRC) asking them to write off the tax underpaid. The LITRG welcomed January's announcement by the Exchequer Secretary not to collect underpaid tax from some 250,000 pensioners whose state pensions had not been matched to their other income.

Much the same circumstances apply to claimants of other taxable state benefits who would have paid the right tax if HMRC had made prompt use of information from the Department for Work & Pensions (DWP). But those people have instead been sent 'P800' tax calculations and been asked to pay the tax back.

Having pressed this issue, the LITRG now understands that HMRC have agreed in principle that the same treatment as was given to state pensioners should be afforded to claimants of other taxable state benefits claimed since before 6 April 2009 although, unlike the pensioners, who have been granted the concession automatically, they will need to contact HMRC asking them to write off the underpayment.

On its website, LITRG has posted guidance and a sample letter to help those affected to write to HMRC with their claim.

John Andrews, Chairman of LITRG, said:

"LITRG has heard from many distressed benefits claimants who are being asked to pay back significant sums of tax - liabilities they were neither expecting nor able to afford. Indeed, most were never advised that their benefit was taxable. Many of them are long-term sick or disabled or caring for other people.

"We now have HMRC's agreement in principle that in these cases tax underpaid should be written off under Extra-statutory Concession A19. We urge people to write to HMRC to claim that relief."

Notes to editors

The LITRG's guidance to state benefits claimants and sample letter can be found on their website:

Common taxable state benefits affected are:
Incapacity benefit
Employment and support allowance
Widowed parent's allowance
Carer's allowance

The LITRG website provides a state benefits checklist for more information:

The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.

The CIOT is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT's primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it - taxpayers, advisers and the authorities.

- ENDS -

George Crozier
External Relations Manager

D: +44 (0)20 7340 0569
M: +44 (0)7740 477374

The Chartered Institute of Taxation
Low Incomes Tax Reform Group

The Association of Taxation Technicians

1st Floor, Artillery House, 11-19 Artillery Row, London SW1P 1RT

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