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HMRC internal manual

PAYE Manual

Reconcile individual: HMRC delay: ESC A19: exceptional circumstances - examples

The following examples show cases where the taxpayer claims ESC A19 for the last closed tax year and exceptional circumstances are considered. You will note that depending on the circumstances, CY-1 tax arrears are not always given up.

These examples are a guide and each case that you review should be based on the facts.

 

Occupational Pension

  • In CY-3 - HMRC receives a form P46(Pen) that a taxpayer is in receipt of an occupational pension. The pension payer uses the emergency code with full personal allowances. HMRC fails to properly review the P46(Pen) and allows the emergency code to continue

The taxpayer already has a job where HMRC have allocated his personal allowances by issue of a code.

In CY, an officer reviews the taxpayer record and notifies arrears at the same time for CY-3, CY-2 and CY-1

  • Subject to reasonable belief, the arrears for CY-3 may be given up
  • But, as HMRC also failed to update the tax codes at annual coding for CY-2 and CY-1, then the arrears for CY-2 and CY-1 are also given up because HMRC has failed more than once to make proper use of facts about a source of income (see PAYE95070)

In this example, the taxpayer’s circumstances qualify for consideration under ESC A19.

State Pension

  • April 2010 - HMRC receives a form P46(DWP) from DWP about the commencement of state pension
  • May 2010 - the taxpayer sends a P161 telling HMRC that they are now paid state retirement pension from April, along with an occupational pension

HMRC fails on each occasion to include the state pension figure in the 2010-2011 tax code in use by his occupational pension payer

  • October 2011 - HMRC issues a P800 underpayment notice for 2010-2011

The arrears for 2010-2011 (CY-1) do not fall within ‘exceptional circumstances’. This is because although HMRC failed more than once to make proper use of the facts in their possession the arrears had not built up over two whole tax years.

In this example, the taxpayer’s circumstances do not qualify for consideration under ESC A19.

Taxable Benefits

Example 1

  • April 2010 - A taxpayer telephones to say that he has been provided with a company car (which is a taxable benefit) from the start of tax year 2010-2011
  • June 2010 - HMRC receives form P46 (Car) from the employer but fails to capture the details or issue a coding notice

HMRC fails on both occasions to include the car benefit in the taxpayer’s 2010-2011 tax code

  • July 2011 - HMRC receives the 2010-2011 P11D
  • July 2011 - HMRC amends the 2011-2012 tax code to include the car benefit
  • October 2011 - HMRC notifies underpaid tax to the taxpayer for 2010-2011

Despite failing more than once during 2010-2011 to make proper use of information about one source of income, HMRC notified the 2010-2011 arrears less than 12 months after the end of the tax year in which the information was received. The arrears have not built up over two whole tax years. They do not qualify for consideration under ESC A19.

In this example, the taxpayer’s circumstances do not qualify for consideration under ESC A19.

Example 2

  • March 2009 - A taxpayer informs HMRC that he will get medical benefit from his employer from April and can we amend his code if it needs adjusting?
  • July 2010 - HMRC receives a 2009-2010 P11D reporting medical benefit

HMRC does not amend the 2010-11 tax code or issue a P800 notice of underpayment for 2009-2010

  • July 2011 - HMRC receives a 2010-2011 P11D reporting medical benefit

HMRC correctly amends the 2011-12 tax code to include medical benefit

  • October 2011 - HMRC notifies tax arrears for 2009-2010 and 2010-11
  • The taxpayer claims ESC A19 because HMRC failed to amend his code twice

Subject to the reasonable belief test, the arrears for 2009-2010 and 2010-2011 may be given up. For CY-1 2010-2011 under ‘exceptional circumstances’ HMRC has

  • Failed more than once to act on information about the same source of income

And

  • The arrears cover two whole tax years and built up over that period from the point that HMRC first received the information

In this example, the taxpayer’s circumstances qualify for consideration under ESC A19.