EP6616 - Underpayments/Overpayments: ESC A19: Exceptional circumstances - Key points

• The last two bullet points of the concession allow tax for CY-1 to be given up where we have failed more than once to act on information that more tax is due and, as a result, the underpayment has built up over two or more complete income tax years (that is, the year ended 5 April), of which CY-1 is the latest. When there are larger than usual numbers of PAYE open cases for CY-1 and earlier you may find that you are considering this part of the concession fairly often; but note the next bullet point regarding "reasonable belief".
• The reasonable belief condition of the concession (EP6619) applies equally to cases falling within "exceptional circumstances"; you must be satisfied that it was reasonable for the taxpayer to believe that his or her tax affairs were in order for the tax to be given up.
• As worded, the penultimate bullet point of the concession is more restrictive than was intended. The reference to "...one source of income" should be taken as meaning "one particular aspect of a person's tax affairs". It covers repeated failures to act on the same piece of information as well as a single failure to act on each of several items about the same aspect.
• Many cases where we have failed more than once to make proper use of information can be easy to identify because, for example, the taxpayer has repeatedly contacted us. Where we acknowledge the delay, but still fail to act, the taxpayer will not pass the reasonable belief test - he clearly knows that his tax affairs are not in order. This contrasts with the situation where we reassure the taxpayer, possibly on more than one occasion, that everything is fine and then belatedly spot the failure and ask for payment - see EP6118, fourth bullet point.
• More difficult are those cases where we have received an item of information on only one occasion, not dealt with it, and have failed also to take a later opportunity to act on it, when accessing the case for another reason. The second failure would not count for the purposes of ESC A19 if the reason for accessing the record is unconnected with the information received and we could not reasonably be expected to spot the first failure and to take account of the information at that time.
• See example 1 at EP6617.
• It is unlikely that "exceptional circumstances" will apply to over-repayments. You should seek advice from PAYE Technical Advice - Shipley for any case where a taxpayer persists with a claim that an over-repayment made in CY-1 should be given up under ESC A19