PAYE95070 - Reconcile individual: HMRC delay: ESC A19: exceptional circumstances - key points
The last two bullet points of ESC A19 allow tax for CY-1 to be given up where exceptional circumstances apply. This will be where
- HMRC has failed more than once to act on information about the same source of income
- 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
For each tax year you must be satisfied that it was reasonable for the taxpayer to believe that their tax affairs were in order, for the tax to be given up.
Repeated failures
The penultimate bullet point of ESC A19 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, where a review of that information was necessary as well as a single failure to act on each of several items about the same aspect.
Cases where HMRC has failed more than once to make proper use of information can be easy to identify, for example if the taxpayer has repeatedly contacted HMRC to amend a code. Where HMRC acknowledges the delay in amending the code, but still fails to act on the information, 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 HMRC reassures the taxpayer, possibly on more than one occasion that there is no need to amend a code or issue a calculation and then belatedly spot the failure at a later point.
Viewing records
More difficult are those cases where we have received information on one occasion, not dealt with it, and have viewed the taxpayer record for another reason at a later point. The second ‘view’ would not count as a failure because the reason for accessing the record is unconnected with the information received. An example might be simply changing the taxpayer’s address in response to a telephone call.
