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HMRC internal manual

PAYE Manual

HM Revenue & Customs
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Reconcile individual: HMRC delay: ESC A19: exceptional circumstances - key points

In exceptional circumstances, HMRC may give up arrears for CY-1 but only

  • if it had also allowed arrears for CY-2 to build up and had failed more than once to act on information about the same source of income.
  • where notification of arrears occurs within the same tax year

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 reference to ‘one source of income’ should be taken as meaning ‘one particular aspect of a person’s tax affairs’. It includes 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. It also includes cases where HMRC receives details of a new source of income and subsequently fails to update a customer’s tax code at annual coding.

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.

Any tax arrears given up due to tolerances remain arrears for purposes of ESC A19.