PAYE95045 - Reconcile individual: HMRC delay: ESC A19: failure to make proper and timely use of relevant information

The opening paragraph of ESC A19 specifies that arrears of income tax and capital gains tax may be given up if they result from HMRC failure to make proper and timely use from information supplied by

  • A taxpayer about his or her own income, gains or personal circumstances
Or
  • An employer, if the information affects a taxpayer's coding
Or
  • The DWP, about a taxpayer's state retirement, disability (this includes Employment and Support Allowance (ESA) claims notified on ESA1) or a widow's pension

Information from the taxpayer can also include information sent by their agent.

Information received from a pension payer is classed as employer information.

Proper and timely use of information, in this context, is linked to our expected business process.  That means, for PAYE purposes, where CY-1 arrears are identified in CY, there has been no failure to make proper and timely use of information, regardless of when the information was received.

Unless exceptional circumstances are met, arrears notified CY-1 cannot be given up under ESC A19. 

HMRC may be notified of information before the relevant tax year. This can result in arrears being notified more than 12 months after the end of the year in which the information was received. Where this is the case, the reviewing officer must consider the following points first

  • As the concession relates to arrears, for information to be relevant it must lead to a determination, after the end of the relevant year, that more tax is payable
  • For PAYE purposes, the information should have prompted a coding review in line with our expected business process
  • Whether the arrears were notified in a timely manner; timely means that arrears are notified 12 months or less after the end of the tax year in which the arrears arose, the relevant year.

Where the reviewing officer has determined that HMRC had failed to make proper and timely use of information, and is also satisfied, that the taxpayer reasonably believed that their tax affairs were in order, relief under the ESC A19 may be granted.

As above, where HMRC failed to make proper use of information, but made timely use by notifying arrears less than 12 months after the relevant tax year, relief may only be considered under exceptional circumstances and given up where

  • HMRC has failed more than once to make proper use of the facts we had been given about one source of income
  • HMRC allowed the arrears to build up over two whole tax years in succession by failing to make proper and timely use of information we had been given (see PAYE95070)
  • HMRC is satisfied that it was reasonable for the taxpayer to believe that their tax affairs were in order.

That means CY-1 arrears cannot be given up in isolation.  For example, HMRC correct a tax code in April 2017 to account for an additional source of income.  But the information was first received in January 2015 and relevant to income for the tax years 2014 to 2015, 2015 to 2016 and 2016 to 2017.  Because of the particular circumstances, let's say the taxpayer's income was below their personal allowances, there was no liability to pay tax for 2014 to 2015, or 2015 to 2016.  However, the information leads to 2016 to 2017 arrears identified at reconciliation in July 2017 (CY-1). Although HMRC failed more than once to make proper use of the information until April 2017, by not amending the tax code at first point of contact and annual coding subsequently, HMRC made timely use of the information because the 2016 to 2017 arrears were notified within 12 months after the end of the year in which they arose, the relevant year.

Exceptional circumstances criteria are not met because there were no previous year's arrears and that meant the 2016 to 2017 arrears had not built up over two whole tax years.

CY-1 arrears can only be given up if HMRC had failed to make proper and timely use of information resulting in arrears for CY-2 or earlier.  This will only happen where CY-1 arrears are notified in the same tax year as earlier years arrears and the arrears are for the same reason.

Further examples can be found at PAYE95075

Where information affecting personal tax liability is alleged to have been provided to unconnected parts of HMRC, or in such a form or manner that HMRC could not reasonably have acted upon it, then the request under the concession should be refused.

If there is no trace of information, or dates of contact that the taxpayer claims it was sent, or made, each case should be judged on its merits, using whatever information is available on the taxpayer record.

The benefit of the doubt should be given that the information was received if it is likely that it was.  However, you can make further enquiries with the taxpayer, their employer and/ or pension payer.