The result being that tax paid in previous years may turn out to be over/underpaid.
Unfortunately, not everyone is a tax professional (nor indeed can most people afford to pay a tax professional). The average taxpayer (trusting that their employer and HMRC have managed to get the numbers right) will have assumed that once the tax is paid, that is that.
As we now all know, from the recent issue wrt tax reconciliations, HMRC have discovered that there is a significant amount of unpaid tax (£2BN) over the last two years owed by approximately 2 million people due to errors in their Pay As You Earn (PAYE) tax code.
HMRC are in the process of sending out letters to people who they have identified as owing them money.
However, it seems that this is but the tip of the iceberg and many more people will be on the receiving end of a demand for underpaid tax.
HMRC is extending its investigation (PAYE reconciliations) into earlier years, as it has every right to do.
HMRC has admitted that it is struggling with a backlog of 17.9 million "open case" files, with almost 2 million dating back to 2004.
As noted, HMRC has every right to issue revised assessments for earlier years. However, many taxpayer will simply not be in a position to (or indeed expect to have to) pay several years of underpaid tax.
The issue is not merely one of "reconciling" open items, but one of politics and understanding human nature when it comes to people's attitude to "money in their pockets" and taxes.
The demands for the underpaid tax of the last two years will spark considerable anger, were the government and HMRC to push ahead with demands going back six years the political fallout and public anger will be unimaginable.
Good luck with that then!
Tax does have to be taxing.
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