Who said Tax doesn't have to be taxing? Submitted on 24.03.2011

Over the past two years over 2 million people were undercharged by £1,500 and 4 million substantially overpaid tax leaving net deficit of £2bn.

It is another blow to HMRC which blundered in 2003 when tax credits were introduced and millions of pounds were paid out in overpayments.

The latest slip-up is being attributed to a computer errors now being being picked up by new technology introduced by HMRC in 2009. HMRC having been under the Chancellors knife in the recent spate of public sector cuts is promising to become much more sophisticated in its tax collection techniques.

If you receive a letter forming part of the HMRC P800 calculation it is important to remember they are calculations not demands.

If you feel the calculation is incorrect you may challenge the decision but be prepared to provide evidence.

For cases of genuine hardship you may be able to apply for a concession on the tax payment under Extra-Statutory Concessions of August 2009 A19 which deals with arrears of tax through official error.

HMRC may consider tax concessions for some of the following circumstances.

Inland Revenue's failure to make proper and timely use of information supplied by:

• a taxpayer about his or her own income, gains or personal circumstances
• an employer, where the information affects a taxpayer's coding; or
• the Department for Work and Pensions, about a taxpayer's State retirement, disability or widow's pension.
• failed more than once to make proper use of the facts they had been given about one source of income

HMRC deals with issues differently:

• If you have paid too much tax, HMRC will automatically send you a repayment, usually within a week
• If you have paid too little tax and the underpayment is under £2,000, HMRC will automatically include the amount you have underpaid in your tax code for 2011-12. This spreads the collection of the underpayment throughout the year
• If the underpayment is under £2,000, but the coding deduction causes hardship, you can ask for the underpayment to be included in your tax code over a longer period
• If the underpayment is £2,000 or more, HMRC will write to you and ask for direct payment. You should contact HMRC on 0845 3000 627 if you wish to discuss a repayment schedule

HMRC may forgo collection in very limited cases. There are specific, limited, circumstances in which HMRC can agree to forgo collection of an underpayment where information they held was not used at the right time.