PAYE95070 - Taxpayer end of year: HMRC delay: ESC A19: exceptional circumstances - key points

The last two bullet points of the concession allow tax for CY-1 to be given up

• if we have failed more than once to act on information that more tax is due
• as a result, the underpayment has built up over two or more whole Income Tax years (that is, the year ended 5 April), of which CY-1 is the latest.

The ‘exceptional circumstances’ part of the concession should be applied only if these arrears are notified to the taxpayer within the same tax year. See example 2 at PAYE95075.

The reasonable belief conditionPAYE95080applies equally to cases falling within‘exceptional circumstances’; You must be satisfied that it was reasonable for thetaxpayer to believe that his or her tax affairs were in order for the tax to be givenup.

Repeated failures

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.

Cases where we have failed more than once to make proper use of information can be easy to identify, for example if 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 - they clearly know that their 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.

Amending records and automatic outputs

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. An example might be simply changing the taxpayer’s address in response to a telephone call.

Some outputs are automatic, for example, code changes for Budget increases in personal allowances. There is no human intervention in this process so there is no failure to act upon information for the purpose of ESC A19. But keep in mind that the notice of coding that the taxpayer receives could have a bearing on ‘reasonable belief’ PAYE95080.

It is unlikely that ‘exceptional circumstances’ will apply to over-repayments. You should seek advice from PSN PAYE Technical, 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.