HMRC under fire for ‘inaccurate’ automatically issued letters

A joked about tax blunder over the weekend is this week causing growing disquiet among advisers to contractors about how it came about -- HMRC’s automated letters.

Speaking to a Sunday broadsheet, a Revenue customer revealed that he had received his bill for the 2017/18 tax year for the grand total of one pence.

Taunts of the taxman ensued, for the sheet of paper that the letter was sent on costing more than the demand, which equates to 60% less than the price of sending it by second class post.

'In equal instalments'

Others jeered HMRC for telling the customer he could pay his bill through his "wage, salary or pension in equal instalments" -- the standard text HMRC uses in its auto-generated tax demands.

The Revenue has since clarified that the customer does not need to take any action, and nor do others when such tiny amounts are owed. But advisers say that the blunder has a serious side.

For example, the distribution of a letter for a single penny is a waste of taxpayer money, and often leads to further costly inefficiency.

'Understandable queries'

In fact, when they go awry, auto-generated tax letters are notorious for “leaving HMRC’s staff to deal with understandable queries from taxpayers and agents,” says Blick Rothenberg.

The accounting firm was referring to a particular batch of the taxman’s letters enquiring recently about offshore income or gains in earlier tax years.

“Many of the [offshore-related] letters are inaccurate, do not reflect the person’s tax return and can be intimidating,” said the firm’s tax dispute resolution partner Fiona Fernie.

'Formatting issues'

But even contractors with more straightforward, less exotic tax affairs are also too often on the receiving end of inaccurate, automatically-issued HMRC letters, says SJD Accountancy.

“Due to the automated nature of the letters sent out by HMRC which our clients receive, there is sometimes incorrect information due to formatting issues”, says the firm’s Chris Armorgie.

“Despite a small amount of concern from clients [that] any letter asking for incorrect sums, fees or in some instances incorrect dates from HMRC would lead to, a simple phone call to HMRC is often sufficient to sort this out.”

'Not something we can control'

Not all contractor accountants are so forgiving however. Especially when incorrect content in the taxman’s automated letters can cause a contractor to consider taking their business elsewhere.

“Just today we were having a difficult conversation with one of our clients who said they were receiving some scary emails from HMRC due to our incompetency,” said DNS Associates.

“They were scared as they thought it will impact their credit history and blamed us for it, threatening to switch accountants. We had to spend hours to help them understand that we had done everything we were required to do, and that the offending automated emails from HMRC were not something we can control.”

'Disgruntled'

Asked about the emails, the accountancy firm said the customer had wrongly been automatically sent debt collection notices from HMRC. And not once, but twice.  

“Even after appealing [on our customer’s behalf], a month later a second automatically issued notice arrived from the Revenue,” the firm’s Amit Agarwal said. “We’ve now got a disgruntled client through no fault of our own. I hope that they stay with us.”

Sounding sympathetic to contractors who receive a harder-hitting follow-up to the first automatically issued letter -- which should not have been sent in the first place, Intouch Accounting confirmed it is common.

'HMRC's frustrating policy'

“We often receive automated correspondence from HMRC that has taken so long [to get resolved]”, the contractor accountancy firm said, that the follow-up “causes stress for the client as they become unsure whether the….original issue [has been dealt with] properly.

“HMRC also often get tax codes wrong and seem to have been trying to predict these based on historical information. Again, this causes extra work for us to have HMRC put this right and extra stress for clients.”

And unfortunately, it’s not always just a case of simply picking up the phone to the taxman to correct the issue, according to Intouch’s head of client services Patrick Gribben.

“Another illustration of HMRC's frustrating policy on communications is the lack of consistency around ways to contact them,” he said. “Some issues can be dealt with by phone, others by email and some still only by post.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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