The amount demanded may be wrong
Problems paying your tax? guide
In many cases, you may not agree with the amount of tax shown on a Statement of Account, or demanded by DMB. There could be a simple error – such as failure to credit a payment you have made – which can be sorted out by a phone call to the telephone number shown on your Statement of Account.
If your profits have fallen, then any payments on account included in your bill may be too high. You can ask to have them reduced. This can be done on-line, by phoning HMRC or by completing form SA303. You will need to make a realistic estimate of your tax bill for the year for which payments on account are due. See Self-employed – working out and paying your own tax to see how payments on account work.
In other cases, part of your tax bill may be based on an estimate of your tax liability (a “determination”), because you have not sent in your tax return. If you act quickly is usually possible to get it corrected, provided you follow the right procedures. You need to act within (broadly) four years of the end of the tax year, or HMRC will not process your return.
If you have not completed any tax returns you will be liable for any penalties, interest and tax charged under a “determination”. These are treated as being correct and are enforceable until the completed tax return is submitted, and the tax bills are revised.
Once the tax return has been submitted, the amount of tax is revised and you will then be asked for this revised debt plus interest and any penalties which remain due in respect of the revised debt.
DMB is concerned not just with payment of outstanding tax, but also with bringing your affairs completely up to date. If you have not sent in all your tax returns, DMB is likely to continue taking action against you, even if you pay all the tax demanded. It is therefore in your best interests to send in all your tax returns as soon as possible. At TaxAid, we frequently find that doing this reduces the size of the tax debt to more manageable proportions.
Tax returns can still be sent in after the normal 31 January filing date, but there are time limits. The usual deadline for submitting a tax return is four years after the end of the tax year. But if HMRC has made a “determination“, then you have only 3 years from the 31 January filing date in which to submit your tax return (or 12 months from the date the determination was issued, if this is later). Once this deadline is passed, HMRC will not process the return.
If HMRC has estimated your tax bill and you are too late to file, you may be able to claim “Special Relief”. Under the Special Relief rules, HMRC will reduce the estimated bill in line with the late tax return only if it would be “unconscionable” for them to refuse. This is a difficult test to pass. If you think this could be an option for you, contact TaxAid and check with an adviser.
Example: Andrea was sent a tax return for the tax year 2012/13. Because she had stopped being self-employed, she did not think she needed to complete the tax return. In February 2014, HMRC made a determination, charging £1,500 in tax. Andrea has until 31 January 2017 to displace HMRC’s estimate by sending in a tax return. This is 3 years from the 31 January 2014 filing date for the 2012/13 tax return.
There is more information on Special Relief in the Bankruptcy section.
- estimated bill sent by HMRC when they have not received your tax return.
- Debt Management and Banking. The HMRC department responsible for debt recovery.
- payments on account
- provisional amounts of tax payable until your final bill for the year is worked out
- payment on account
- a provisional amount of tax payable until your final bill for the year is worked out