Tools: Extra Statutory Concession A19 (ESC A19)
HMRC have a huge amount of power – and they are getting more and more all the time; a tax barrister recently told me, “If the police were getting powers like HMRC are getting there would be people demonstrating in the streets, but because it’s tax they are getting away with it.” But there are chinks in the HMRC armour and ESC A19 is one of those important chinks.
Deep within HMRC’s culture is a core belief that they simply cannot be wrong. I know it’s difficult to believe, so I’ll give you an example.
Back in 2010 HMRC found that an estimated 2.3 million people underpaid income tax over two tax years owing to errors in their Pay As You Earn (PAYE) tax code. In an interview with BBC Radio 4’s Money Box, Mr Hartnett (the then HMRC boss) insisted the situation was not “extraordinary” and rejected claims HMRC was to blame. I’ve read the papers, listened to the media and heard stories of HMRC blunder and IT failure – neither of those are true,” he said…”I’m not sure I see a need to apologise.”
It was HMRC’s fault and Mr Hartnett did apologise.
My point here is to show the arrogance within HMRC’s culture, when they’ve clearly made a mistake they simply turnaround and say, “Not our fault”.
So – sticking with tax codes for the moment – if you go to HMRC and say I’m on tax code x and I want to check it’s the correct code and HMRC say that it is, then two years down the road it turns out it’s not correct and you’ve paid too little tax HMRC will say, “Even if we gave you incorrect information about your tax code it’s not our fault, because ultimately the responsibility rests with you.”
This is where ESC A19 comes into play, here’s the exact wording.
You can make a request if all of the following apply:
• HMRC haven’t used tax information provided to them, eg about a change of income or job
• HMRC told you about the arrears more than 12 months after the end of the tax year in which they received your information
• you have a reasonable belief that your tax affairs are up to date
Tax information could come from:
• your employer
• the Department for Work and Pensions (DWP)
You can’t normally cancel tax owed via Self Assessment, unless there are exceptional circumstances, eg where HMRC:
• told you about 2 or more years of PAYE tax owed
• failed to act on information you’ve given them more than once
And there it is right on the end! If you are self-employed and you’ve given HMRC information that they haven’t acted on (more than once) you have a strong argument to not pay any tax owed.
I know what you are thinking: if this ESC A19 thing is so important and HMRC is so powerful and arrigent why don’t they try to remove it?
Well they have, for years, but that’s another story altogether. I should add that this is a concession rather than law which makes it all less cut-and-dried but the principle is there and this is how it works.
In short ESC A19 is the nearest thing to a ‘get out Of Jail free’ card you can find outside Monopoly.
HMRC’s guidance to customers on their website: https://www.gov.uk/hmrc-did-not-act
HMRC’s internal staff guidance can be found in their procedural manuals. It is too long to reproduce here, but if you wish to read it all, you can find it on their website: http://www.hmrc.gov.uk/manuals/pommanual/paye95000.htm