Collecting tax debts
HMRC has recently issued draft guidance on its new powers to collect tax debts under PAYE.
Currently HMRC, with your agreement, can collect small underpayments of tax by an adjustment to your PAYE tax code.
Under the proposed legislation HMRC will be able to collect other small debts by an adjustment to the tax code. The sum to be coded out may be made up of several small sums not exceeding £2,000 in total.
Where debts have not been paid within say, six months of the due date, HMRC may issue a note imposing the coding change. You may not be asked to agree but you have a right to appeal!
This may save HMRC some administration time but is likely to create additional hassle for taxpayers and their advisers.
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Cathy Corns is a Tax partner at Mercer & Hole.
Date: 6th July, 2009
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