Paying Your Tax on the PAYE ‘Never Never’

Property investors who are taxed under the PAYE system can opt to have their tax coding adjusted to collect any extra payments generated from rental profits – but often the tax man ignores their requests.

Landlords who have a PAYE day-job can ask HM Revenue and Customs to collect tax of up to £3,000 by changing their coding for the next tax year, which starts in April.

The taxpayer then avoids finding a cash lump sum for the end of January and spreads the cost of this year’s tax until March 2013.

To make the request, a property investor has to:

• Submit a tax return online with the right boxes completed by December 31.
• Ensure the tax due does not exceed £2,999.99

Many property investors find the PAYE taxpaying option confusing because they don’t understand the rules.

Even if a taxpayer files the tax return on time instructing HMRC to take the tax on the PAYE ‘never never’, the taxman can reject the plea for one of two reasons:

• Citing regulations that stop the taxman coding out tax bills that are more than double the PAYE tax due in a year
• Claiming that some taxpayers would complain treating others in this way would be unfair

Both reasons are barmy – no-one can find the regulation for the first reason – and HMRC are yet to supply the details – and the second reason is clearly subjective and has no evidence to support the argument.

Tax professionals suspect the real reason is HMRC’s technology cannot cope with the instruction and the excuses are masking the truth.

If you want to ‘code out’ your tax bill and the taxman says no, then talk tough and point that Para 9.6 of June 2011’s Working Together Steering Group says he must.

Like all dealings with HMRC, do not discuss the problem by telephone – write to your tax office so you have an audit trail of responses.

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