As we reported here previously, the chaos surrounding HMRC's operation of PAYE has led to 1.4 million PAYE workers underpaying £2 billion for the 2008/09 and 2009/10 tax years. As we also reported, this is in fact just the tip of the iceberg; the NAO report speculated that there is another 18 million open cases from years prior to 2008/09 with an estimated £1.4 billion underpaid and £1.4 billion overpaid.
Now the BBC has reported that underpayments from 2007/08 and earlier may just be written off; that's £1.4 billion!
So what's happened?
Like an episode of Glee, it's quite hard to figure out what exactly is going on. Insiders within HMRC have leaked to the media that £1.5 billion of unpaid tax is unlikely to be pursued. The main driver of this? Well, it's seems to be a cost/benefit scenario. As the debts are more than 2 years old, many people may seek to mount legal challenges. If you read us often, you'll know that HMRC is short of resource; the time and effort involved in fighting legal challenges would soak up this valuable resource. Consequently HMRC may just write the debts off. As well they should.
Does this impact people who have overpaid tax?
No! HMRC will continue to review open cases where tax has been overpaid and issue any refunds identified. Of course as the NAO reported, the timeframe for sorting this out is 4 years so if you think you've overpaid, it's probably best to be proactive and get your claim in ASAP.
Lastly but by no means lastly, if you've been affected by this and wish to air your views, Panorama is currently filming on this topic and is looking for interviewees. If you wish to participate email me here and we'll put you in contact: email@example.com.