PAYE95075 - Reconcile individual: HMRC delay: ESC A19: exceptional circumstances - examples
Here are some examples of exceptional circumstances.
Example 1
May 2006 - A taxpayer telephones to say that he has been given a company car for the first time.
June 2006 - We receive form P46 (car) from the employer.
August 2006 - We amend his code for medical benefit based on the previous year’s P11D.
We fail on each occasion to include the car benefit in the code.
July 2007 - We send an informal calculation for 2006-07, including the car benefit as returned on the 2006-2007 P11D, and correct the code for 2007-2008 to include all taxable income.
Although we failed more than once to deal with the information, the arrears are for one year only so the ‘exceptional circumstances’ do not apply. As we corrected the failure less than 12 months after the year in which the information was received the underpayment at 5 April 2007 does not qualify for remission under ESC A19.
Example 2
As for example 1, except that we did not amend the 2007-2008 code in July 2007 so that the failure to code out the car benefit was repeated in 2007-2008. We send out the 2007-2008 calculation in May 2008.
The underpayment does not qualify for remission under ESC A19 because it is for one year only. In this example, each year (2006-2007 and 2007-2008) was CY-1 at the time the arrears were notified, so ESC A19 cannot apply to either year. The information received in 2006-2007 is relevant for that year only (see Form P11D, PAYE95055).
Example 3
As for example 1, except in this instance we did not make the 2006-2007 calculation or amend the code for 2007-2008 and allowed the failure to continue until May 2008. As a result, there are underpayments for 2006-2007 and 2007-2008, notified to the taxpayer at the same time in 2008/09.
Subject to reasonable belief, the underpayment for 2006-2007 may be given up because we failed to act on information more than 12 months after the year in which we received it.
2007-2008 is CY-1 and would not normally qualify for ESC A19. But in this example we have failed to act on information more than once about the same source of income, and the arrears cover two income tax years. Therefore, the underpayment for 2007-2008 may also be given up under ‘exceptional circumstances’.
Example 4
July 2006 - A taxpayer tells HMRC that he is now being paid state retirement pension.
Aug 2006 - We receive the DWP notification of the pension.
October 2006 - We code out a small private pension.
We fail on each occasion to include the state pension in the code.
May 2007 - We make an informal calculation for 2006-2007, including the state pension, but do not correct the code for 2007-2008, so there is an underpayment for that year also.
Although we failed to act on information more than once, the 2006-2007 underpayment does not qualify for ESC A19 because it is for one year only and we notified the arrears to the taxpayer less than 12 months after the end of the year in which the information was received.
June 2008 - We make an informal calculation for 2007-2008. As in example 2, the 2007-2008 underpayment does not qualify under ‘exceptional circumstances’ because it is for one year only. But, the information that we received is about a pension, which is a source of income that can be presumed to continue for year 1 and all years after that. We are notifying the underpayment for 2007-2008 more than 12 months after the year in which we first received the information (July 2006); therefore the arrears for 2007-2008 (but not 2006-2007) can be given up under the main time limit of ESCA19, subject to reasonable belief.
Note: Any potential underpayment for a current year (2007-2008 in example 1 and 2008-09 in examples 2, 3 and 4) can never qualify to be given up under ESC A19 and should be coded in the normal way.
