HM Revenue and Customs

3. Mr R complains that HMRC failed to correctly apply Extra-Statutory Concession (ESC) A19 to his account. ESC A19 allows HMRC to give up the collection of underpaid tax if certain criteria are not met. He disagrees with HMRC’s opinion that he did not tell it he was no longer claiming work expenses, which caused the underpayment. Mr R says he did not know he was claiming these expenses and therefore could not mention them. He explains he gave HMRC information which would (or should) mean it knew he did not have these expenses.

4. Mr R says HMRC’s failure to apply ESC A19 means he is experiencing financial difficulties, to repay the underpaid tax. He also explains this has affected his mental health.

5. Mr R would like HMRC to clear the charges and refund those he has already paid. He also asks to be compensated financially for the impact this issue has had on his mental health and his financial stability.

6. Mr R changed employer in March 2019. Up to this point, he claimed business mileage expenses which he was not taxed on. His new job included a company car, which Mr R discussed with HMRC more than once.

7. Mr R’s tax code was changed to include the company car. However, as he did not specifically tell HMRC he would no longer be claiming mileage expenses, HMRC did not take any action on this. This meant the £5,498 tax free allowance applied in the 2018/19 tax year for mileage expenses was carried forward to the 2019/20 and 2020/21 tax years. This created an underpayment of £2,626.80 and £2,945.20 in turn.

8. Mr R complained to HMRC about this in May 2021. He completed its complaints process which ended with the Adjudicator’s Office (AO) issuing a report on 28 January 2022. The AO did not uphold the complaint and agreed HMRC was allowed to claim the underpayment back.

11. Before we decide if we should do a detailed investigation of a complaint, we look at whether there are signs the organisation has got something wrong. We do this by comparing what should have happened with what did happen. We have done this and have not found any signs that something has gone wrong.

12. Mr R has a tax debt for the tax years 2019/20 and 2020/21. This is because expenses of £5,498 per year were included in his tax coding for these two years. This meant that Mr R underpaid tax during this time.

13. The expenses came from a job Mr R had before March 2019 and were for business mileage. If an employed person has business expenses of more than £2,500 per tax year, HMRC requires them to complete a self-assessment tax return. Mr R completed a tax return for the 2018/19 tax year to declare expenses of £5,498. This was carried forward automatically to later tax years. This is standard practice and continues until action is taken to change it.

14. There is no complaint with these facts. The complaint is Mr R thinks HMRC should have removed the business expenses when he told it about his new company car in March 2019. HMRC disagrees and says Mr R did not mention the expenses and it had no reason to query these with him.

15. Mr R says he told HMRC about his new employment and company car more than once. It does not seem that HMRC disagrees with this. Mr R believes HMRC should have known from his discussions that he no longer needed to claim expenses, and it should have changed his tax code to show this.

16. HMRC says that when Mr R called it on 24 May 2019 to update his company car details, its advisor explained his current tax code included his personal allowance (the amount of income you can have before having to pay tax) plus expenses and benefits in kind (a ‘perk’ provided by an employer which does not take the form of money, for example, a company car or living accommodation. Tax still needs to be paid to recognise these benefits). It notes that Mr R did not tell it that his expenses were no longer relevant. HMRC says Mr R did not question what these were or why they were in his tax code.

17. HMRC repeated this information during phone conversations with Mr R on 9 October 2020. There is no suggestion that Mr R asked what the expenses were in his tax code at this point.

18. HMRC sent Mr R 11 tax coding notices between May 2019 and February 2021. All of these included the business expenses. There is nothing to say Mr R contacted HMRC to question these.

19. It seems the first time Mr R questioned this was on 21 April 2021, when he called HMRC after getting a penalty notice for not doing his 2019/20 tax return on time. HMRC explained he had not completed the self-assessment tax return for this period, which was needed because of his business expenses.

20. HMRC closed Mr R’s self-assessment account when he said he did not get these expenses anymore. It also cancelled the penalty and explained that because he had not told HMRC about this sooner, Mr R had underpaid tax in both 2019/20 and 2020/21 tax years.

21. While we understand Mr R’s opinion, it was Mr R’s responsibility to ask HMRC to close his self-assessment account. There was no requirement for HMRC to question whether he still needed to claim expenses, even though he had a new company car. When he called to discuss his tax coding, HMRC advisors would have been able to see there were expenses claimed by self-assessment, but not what these expenses were. There are many expenses that employed people may claim tax relief on apart from business mileage.

22. It is clear that HMRC told Mr R about the expenses more than once, both by phone and in writing. This gave him opportunity to query it and to help reduce the underpayment that was calculated.

23. Mr R knows HMRC has the discretion to give up tax collection in some circumstances. This ability is set out within ESC A19 and needs specific criteria to be met to allow HMRC to apply this.

24. The first step is that HMRC must have failed to ‘make proper and timely use of information supplied by a taxpayer about his or her own income, gains or personal circumstances’. Mr R argues he meets this criteria. For the reasons explained already, we disagree and are satisfied that HMRC was not given this information until 21 April 2021. HMRC updated its records with this information that day.

25. Because of this, we are unable to agree that HMRC has done anything wrong. We will not investigate the complaint further. It is our decision that the tax underpayment claimed by HMRC is valid.

1. We have carefully considered Mr R’s complaint about HMRC. We were sorry to hear about the underpayment HMRC has claimed back from him and realise he did not mean to not pay enough tax (underpay). It is clear this has been distressing and worrying for him.

2. Our decision is HMRC did not do anything wrong, as it is allowed to claim back underpaid tax if criteria to cancel the collection is not met.