Hi,
I recently received my self assessment for 2002/03 !! in July 2004 as the IR
hadn't been informed by my pay office of my change of address.

As a result of the lateness of this return I am struggling to find out why I
have been presented with tax owing of several hundred pounds ( I'm on PAYE
and have little in the way of interest/dividends etc/other income.)

Speaking to the IR they mentioned a wrong tax code for this year and mention
childrens tax credit being the main culprit.

I have since found the relevant PAYE coding notices for me and my wife and
have the relevant P60's but I wondered if anyone could point me to a website
with details of the rules regarding Children's Tax Credit ( NOT the current
child tax credit) which operated in the year 2002/3 befiore the current
change to child tax credit as I want to try and work out the discrepancy
which has arisen.

Also, does anyone have experince of how sympathetic the IR are i.e.
rescinding late payment fines/interest given that I returned the self
assessment form within 9 days of receiving it ?

thanks for any replies

C

"chris" wrote in message
...
Hi,
I recently received my self assessment for 2002/03 !! in July 2004 as the IR
hadn't been informed by my pay office of my change of address.

As a result of the lateness of this return I am struggling to find out why I
have been presented with tax owing of several hundred pounds ( I'm on PAYE
and have little in the way of interest/dividends etc/other income.)

Speaking to the IR they mentioned a wrong tax code for this year and mention
childrens tax credit being the main culprit.

I have since found the relevant PAYE coding notices for me and my wife and
have the relevant P60's but I wondered if anyone could point me to a website
with details of the rules regarding Children's Tax Credit ( NOT the current
child tax credit) which operated in the year 2002/3 befiore the current
change to child tax credit as I want to try and work out the discrepancy
which has arisen.

The old Children's Tax Credit was worth £529 if you were both basic rate
taxpayers (there was an extra £520 if you had a baby).

However if either of you were a higher rate tax payer that year, they reduced
the amount of the credit by £1 for every £15 you were into the higher rate
(based on the highest earner if you were both into the 40% tax band).

They gave the tax credit by an adjustment to your PAYE code, but because it was
a crappy Gordon Brown tax credit rather than a proper allowance, the PAYE system
couldn't cope with it. They had to guess your income, and if they got it wrong
you could end up owing them a large amount, sometimes even larger than the
credit itself.

As an example, if they guessed you'd be a basic rate taxpayer, they would have
added £2404 to you tax free amount in your tax coding (saving you £2404*0.22 =
£529 in tax).

If you actually earned £3000 into the higher rate, then that £2404 extra would
in fact have saved you £2404*0.4 = £962 in tax, and this was compounded by your
entitlement to the CTC being reduced to £529 - £3000/15 = £329. So you would
have paid £633 too little in tax!

--
Andy

"Andy Pandy" wrote
They had to guess your income, and if they got it
wrong you could end up owing them a large amount...

"Owing them"?? That's an interesting spin on the situation - you actually
meant: "if they got it wrong, you could end up getting a **tax-free loan
from IR** for a while because you'd initially be underpaying your tax"!

Tim wrote:

"Andy Pandy" wrote
They had to guess your income, and if they got it
wrong you could end up owing them a large amount...

"Owing them"?? That's an interesting spin on the situation - you actually
meant: "if they got it wrong, you could end up getting a **tax-free loan
from IR** for a while because you'd initially be underpaying your tax"!

Still means you owe them money

"Tim" wrote in message ...
"Andy Pandy" wrote
They had to guess your income, and if they got it
wrong you could end up owing them a large amount...

"Owing them"?? That's an interesting spin on the situation - you actually
meant: "if they got it wrong, you could end up getting a **tax-free loan
from IR** for a while because you'd initially be underpaying your tax"!

No I didn't, I meant what I wrote. The PAYE system was designed to ensure that
the correct tax was deducted from your employment income. Obviously if you have
other income (interest, dividends etc), you could end up owing more tax, most
people realised that, since the PAYE system only knows about your employment
income.

What many (most?) people did not realise, was that even if your employment
income was your *only* income, if you claimed the CTC the PAYE system still
couldn't deduct the correct amount of tax without guesswork. Most people,
believe it or not, don't bother or even know how to check that the correct
amount of tax is being deducted from their employment income. They don't really
need to, since by and large PAYE does a good and accurate job of it. What it
couldn't cope with was the crappy overly complex way the CTC was implemented. A
*lot* of people ended up getting an "interest free loan" off the IR, trouble was
they only realised it was a loan when they got their assessement.

--
Andy

"Andy Pandy" wrote
They had to guess your income, and if they got it
wrong you could end up owing them a large amount...

Tim wrote:
"Owing them"?? That's an interesting spin on the situation - you
actually
meant: "if they got it wrong, you could end up getting a **tax-free
loan
from IR** for a while because you'd initially be underpaying your tax"!

"Jonathan Bryce" wrote
Still means you owe them money

Only money that you shouldn't have received in the first place.
Tell you what - if you'd like to send me £million for a while
(interest-free), then I'll *happily* owe you a £million!!

"Andy Pandy" wrote
They had to guess your income, and if they got it
wrong you could end up owing them a large amount...

"Tim" wrote
"Owing them"?? That's an interesting spin on the situation - you
actually
meant: "if they got it wrong, you could end up getting a **tax-free
loan
from IR** for a while because you'd initially be underpaying your tax"!

"Andy Pandy" wrote
No I didn't, I meant what I wrote. The PAYE system was designed to
ensure that the correct tax was deducted from your employment income.

Ah, but it doesn't. It is only a "good guess". Ask anyone with a 'BR' tax
code in one job, and insufficient earnings in another job to cover their tax
allowances!

"Andy Pandy" wrote
Most people, believe it or not, don't bother or even
know how to check that the correct amount of tax
is being deducted from their employment income.

Doesn't surprise me. Perhaps they ought to take more notice of their
financial situations?

"Tim" wrote in message ...
"Andy Pandy" wrote
No I didn't, I meant what I wrote. The PAYE system was designed to
ensure that the correct tax was deducted from your employment income.

Ah, but it doesn't. It is only a "good guess". Ask anyone with a 'BR' tax
code in one job, and insufficient earnings in another job to cover their tax
allowances!

Yes, but they've got 2 jobs, so there are "other earnings" as far as each
employment's PAYE is concerned. Employer A doesn't know how much employer B is
paying you so their PAYE system can't possibly guarantee to deduct the correct
amount of tax. That's pretty obvious. What isn't is why the PAYE system can get
it so wrong when their only income is from the one and only job they've got, so
the employer's PAYE system has full details of their total earnings.

"Andy Pandy" wrote
Most people, believe it or not, don't bother or even
know how to check that the correct amount of tax
is being deducted from their employment income.

Doesn't surprise me. Perhaps they ought to take more notice of their
financial situations?

Why should they? That's what PAYE is for.

Similarly If I buy a bottle of wine or fill up with petrol I don't know nor care
how much tax should be charged, I just assume the tax is correct. I don't
calculate it myself to check it's right, and I don't expect HM C&E to send me a
bill if the retailer charged me too little tax.

--
Andy

"Tim" wrote in message
...
"Andy Pandy" wrote
They had to guess your income, and if they got it
wrong you could end up owing them a large amount...

Tim wrote:
"Owing them"?? That's an interesting spin on the situation - you
actually
meant: "if they got it wrong, you could end up getting a **tax-free
loan
from IR** for a while because you'd initially be underpaying your
tax"!

"Jonathan Bryce" wrote
Still means you owe them money

Only money that you shouldn't have received in the first place.

not so! - the current "Tax Credit" is a sham - for some obscure reason it's
directly associated with the tax year Apr-Apr (not related to when any
legitmate needs occurs) thus:

someone with a legitimate claim Apr-Apr get one fullllllllllllll years tax
credit

the same family with the misfortune to the same legitmate claim Sept-Sept
gets **** all (because of defrayment over 2 tax years instead of one)

the arsehole that dreamt this up should be shot for being so ****ing
thick!!!

"Andy Pandy" wrote
No I didn't, I meant what I wrote. The PAYE system was designed to
ensure that the correct tax was deducted from your employment income.

"Tim" wrote
Ah, but it doesn't. It is only a "good guess". Ask
anyone with a 'BR' tax code in one job, and insufficient
earnings in another job to cover their tax allowances!


"Andy Pandy" wrote
Employer A doesn't know how much employer B is
paying you so their PAYE system can't possibly guarantee
to deduct the correct amount of tax. That's pretty obvious.

Agreed.

"Andy Pandy" wrote
What isn't is why the PAYE system can get it so wrong when
their only income is from the one and only job they've got, so
the employer's PAYE system has full details of their total earnings.

But you need to consider it as though the person has two employers, where
"Employer1" is the (one) employer, and "Employer2" is the *IR*.

As you've already pointed out, the problem with underpayment of tax is
actually because the IR ("Employer2") doesn't have details of the employer's
("Employer1") pay :- ...

FROM EARLIER
"Andy Pandy" wrote
They had to guess your income, and if they got it
wrong you could end up owing them a large amount...

/FROM EARLIER

So IT IS EXACTLY THE SAME REASON as for the person with two jobs!!!


"Andy Pandy" wrote
Most people, believe it or not, don't bother or even
know how to check that the correct amount of tax
is being deducted from their employment income.

"Tim" wrote
Doesn't surprise me. Perhaps they ought to
take more notice of their financial situations?

"Andy Pandy" wrote
Why should they? That's what PAYE is for.

Eh? Nope - PAYE is to get "close to" the correct tax, deducted as you go
along. If it gets it wrong, you are still liable to pay the correct tax
(just as you can get a refund at the end of the year if PAYE deducts too
much).

"Andy Pandy" wrote
Similarly If I buy a bottle of wine or fill up with petrol I don't know
nor care how much tax should be charged, I just assume the tax is
correct. I don't calculate it myself to check it's right, and I don't
expect
HM C&E to send me a bill if the retailer charged me too little tax.

HM C&E would send the tax bill to the retailer in that situation.
But there's a subtle difference though - with tax on wine/petrol etc, the
*retailer* is responsible for the tax. But with employment, it is the
*taxpayer* who is responsible for the income tax which they pay (and if PAYE
hasn't done it correctly, they need to ask for a self-assessment form...).