Some 900,000 people will have been sent letters in the last week or so threatening them with a £100 fine plus a further fine of £10 a day over three months.
The letters from HM Revenue & Customs (HMRC) are to people who did not fill in a tax return by the January 31 deadline.
Many thousands of other letters are sent by the tax collectors to people they believe owe tax on savings accounts, pensions or other income.
And it is up to the recipients – if, indeed, the letters are sent to the current, correct address of the taxpayer – to prove they do not owe the money.
While HMRC may appear to forgive the transgressions of big tax avoiders, those of us with slender means will be pursued because we are easy targets for them.
Here at Money Fight Club, what we find interesting is how many people can be very confident that they don’t owe money, or who have a very valid reason for being late with their return, but pay up without a murmur.
Disputing taxes is not about avoiding tax that is genuinely due (not like some big businesses we could name) but finding it hard to square up to the tax man. Why is that?
For example, if you were in a street market and a stall holder wanted to charge you more than the stated price for a pound of apples, you’d stand your corner. You’d make them go through their maths. You’d probably also ask for an apology when you were proved right.
Part of this is due to something psychologists call ‘social proof’. When we’re unsure of something we tend to go with the consensus view. That vast majority of ordinary people accept and pay their tax so our default position is to conform to the social norm.
Scared of making things worse
Another reason HMRC gets an easy ride is because we’re scared that, in fighting back, we’ll actually end up with a bigger bill if we lose. Firstly, on a practical note, the penalty of £10 a day for failing to submit a tax return should not start until you are three months late. So if you feel you were not required to fill in a tax return, that’s 3 months to get HMRC to recognise you are in the right.
Something that big and important can’t be wrong?
We may fail to be more assertive with HMRC in the belief that a massive government department full of experts, expensive computers and sophisticated software can’t be wrong. But HMRC has been suffering the same sorts of cutbacks that other businesses have during the recent and previous economic downturns.
But HMRC is as likely to make mistakes as any other large organisation under pressure. Some tax mistakes have been well publicised.
Often we are intimidated by the context. Those official letters and their very correct language. All those serial numbers and reference numbers and onimous sounding department names can intimidate us if we let them. Psychologists have done a lot of research into why we submit to authority figures. This is something we learn to do from avery early age.
So, what do do about it…
- Well, if you’re right you’re right. Give yourself credit for that and take issue with the tax man.
- Be cool, calm and polite. Remember they may be under a lot of pressure.
- Appeal in good time – don’t just sit on a penalty notice and hope the problem might go away.
- Include supporting facts, figures and documentation – ie turn yourself into an authority.
- Ensure your letters look impressive too! We’ve produced a letter template designed to help you dispute a penalty notice. It can help you deal with any of three issues – you missed the deadline, you do not need to fill in a return, or you do not owe anything. Just fill your own details where indicated on the template. Download it here