Ten ways to beat tax hang-ups

If you're terrified by the tax demand that lands on your doorstep, you are not alone. Millions of us are waking up to a brown letter from the taxman, who is dealing with a vast backlog of cases.

What's more, it is getting ever more difficult to get hold of someone at Revenue & Customs (HMRC) who can sort out any mistakes. HMRC announced this week that its helpline would be shut on Sundays from November 29, and will open only until 4pm, instead of 8pm, on Saturdays.

Even though you may end up hanging on the telephone, the taxman has made systemic errors in so many cases that you really need to check whether their calculations are right before you pay up. We asked accountants for tips to help taxpayers cope with tax letters.

Don't be afraid to demand

Roy-Chowdhury of the Association of Chartered Certified Accountants said: "Check all the items and amounts carefully in any letter you receive, and do not be scared to challenge HMRC. For example, do you agree that you had a company car of a specific value and with the carbon dioxide emissions as stated? Did you have private medical insurance?"

Act promptly and keep records

Geoff Everett, tax director at accountants Smith & Williamson, said: "If you get a tax statement – formally called HMRC form P800 – which you believe is incorrect, bring the discrepancies to the attention of the tax office immediately. Don't wait until the tax is being demanded. If you disagree with the authorities, make your point in writing and be able to provide proof, ideally copies of the supporting paperwork. Be sure to keep a copy of all correspondence."

Be prepared to come up with the evidence to back your claim

You may need to produce payslips, evidence of pension contributions and other documents from as long ago as 2004. George Bull of accountants Baker Tilly said: "HMRC has only checked for the tax years 2008/09 and 2009/10 but if you've overpaid tax you can claim back at least as far as 2006/07 and may be able to claim back as far as 2004/05 in certain circumstances. Four years is now the normal time limit for reclaiming overpaid tax but people who were not sent tax returns for 2004/05 or 2005/06 may claim back tax overpaid in those years as well."

Don't panic!

John Whiting, a director of the Chartered Institute of Taxation, said: "Anyone receiving a P800 from HMRC needs to bear in mind the Dad's Army maxim. You can get free information from the Low Income Tax Reform Group at www.litrg.org.uk/News/2010/paye-round-two or, if a pensioner, call 0845 601 3321.''

Be aware that some groups are more at risk of tax bungles

Mr Everett said: "If you have retired in the past few years, changed jobs, receive benefits–in-kind or have more than one job, you are more likely to be at risk from overpaying or underpaying tax. You are also at risk if you have made additional voluntary contributions (AVCs) to your pension or donated to charity via the Gift Aid system. Another category at risk includes those typically with relatively small investment income, perhaps from dividends or property rental, but which varies year-on-year."

You might not need to pay long overdue tax

Mr Bull said: "HMRC will only write off tax if it had information relevant to your tax liability and failed to make proper use of that information within 12 months after the end of the tax year in which the information was received. That is likely to mean that most people whose tax 'arrears' only relate to 2009-10 will have to pay the tax unless HMRC agrees to write off the debt on hardship grounds. If the error was made in 2008/09, the one-year condition may be satisfied and, if tax was also unpaid in 2009/10 due to the same error, that year's tax should be written off too."

Small errors should also be exempt

Mr Everett said: "The authorities have confirmed that where the tax underpayment for a tax year is less than £300, HMRC will write off the amount rather than collect it."

Apply the 'common sense' test

Mr Whiting pointed out: "People who are getting what seems to be a tax demand may take comfort from the fact that this isn't a formal demand – but it is an indication of what HMRC thinks you owe it. There are some simple steps you should take, such as check the basic data; does it make sense? Has HMRC included a company car you gave up years ago, for example? Do the figures look right? Pensioners, for example, often find HMRC has used the wrong amount for the basic state pension."

It's the squeaky wheel that gets oiled

Mr Bull urged people expecting a refund not to just sit back and hope. "If you have overpaid tax and want it back now, you need to claim it," he said.

Beware of fraudsters

Mr Everett pointed out: "HMRC will send tax demands only in writing. If you get an email or phone call saying that you owe additional tax, but get nothing in writing from HMRC, then don't pay it."

Source: http://www.telegraph.co.uk 

The price of being single

Living alone costs singletons an extra £250,000 over a lifetime compared to couples, it is claimed. So what is the "singles tax", asks Tom de Castella.

The illusion of single life being one long party has been shattered, was the bold claim.

Carrying the full burden of a mortgage, holidays and bills all adds up and single people spend more than £250,000 over the course of their life because they are not part of a couple, a new study suggests.

Researchers compared the spending of people living alone with couples, says price comparison website uSwitch, who commissioned the study. According to the findings single people are paying a hefty penalty for going it alone - hence the non-stop party illusion being shattered. But is it really true?

"Being single costs a lot and you're bloody miserable - that's what singles themselves say," says Ann Robinson from uSwitch. "Only 20% believe they've got the better deal than couples."

The biggest aspect of the "singles tax" is housing, with people who live alone having to pay an average of £7,080 a year on mortgage or rent compared with £3,804 for someone living with a partner. Then there are household bills and council tax. And while lone residents can claim a rebate on council tax, it is only 25% rather than the 50% it should be to equal what a couple pays.

Expensive single hotel rooms and the lack of opportunity for bulk buying at the supermarket are additional penalties.

The findings were given added impetus by the projection that the number of single-person households could reach 9.5 million over the next decade.

"If you live alone the chances are you're not going to go on holiday so much - 43% of people who live alone don't go on holiday," say Ms Robinson. "You're having to spend on necessities rather than having fun. £5,000 is a lot of money to lose a year - you could definitely have a great holiday for that."

But Stuart Adam, senior research economist at the Institute for Fiscal Studies (IFS), doubts whether the situation is as clearcut as the study presents.

"The quarter of a million figure depends first on whether you believe their £5,000 a year finding and I'd need quite a lot of convincing that they'd got their methodology right. Then to get from £5,000 a year to a quarter of a million over your lifetime they've based it on 53 years alone from 22 to 75. But nowadays people change their status all the time, going into couples and splitting up."

Buying power

It's even possible that the research is skewed because the type of person who becomes part of a couple is different from someone who stays single, he says.

And crucially it ignores the impact of benefits and tax credits, which usually favour single people, he says. Recent research by the IFS has quantified that single people claiming benefits are on average £45 a week - or £2,340 a year - better off than those in a couple. So, for those at the bottom of the income league there may be a benefit to being single, although this must be balanced against savings that couples make from economies of scale, he says.

"There are clearly financial benefits to being in a couple, the biggest thing is housing costs," says Mr Adams. "But that's not to say you're better off. We did research on the effect of tax credits and benefits and the bottom line is that it penalises couples. The Conservatives talked in their manifesto about reducing the couple penalty, but they haven't tried to bring it in yet."

Martin Lewis, founder of the website Moneysavingexpert.com, is cautious about the uSwitch figures, but accepts the basic premise that couples have a clear advantage when it comes to buying power.

"There's no doubt that single people end up paying more to live than a couple because of economies of scale. But these economies of scale can vary a lot, it all depends on how intelligent a consumer you are."

The art of being a clever consumer is more or less the same for singletons as anyone else, he says. Dropping down a brand, making a shopping list, menu planning are all ways of cutting supermarket bills. But it's harder for singles when it comes to going on holiday.

"For most hotels you pay by the room," he says. "And even if you find a single room - and they're few and far between - you'll still pay more."

But there are ways around this like going with a travel company who cater for singles by trying to fix you up with someone else. And single travellers are more likely to pick up cheap flights if availability is tight - and they also have a greater chance of being upgraded.

'Stinking rich'

But in the main the odds are stacked against singletons, Mr Lewis warns: "Most companies predicate their prices to the norm and more people are going away in pairs and families than as singles. Is it fair that they have to pay more? It won't feel fair to single people, but it's rational."

Hannah Betts, who writes the column Things You Only Know If You're Single in The Times, accepts that it is "bloody expensive" living alone. Some of her sources complain that going on holiday with couples can be impossibly expensive.

And then there's the question of one's living arrangements. She recalls how a single friend suddenly realised why her flat was such a "student hellhole" compared to the homes of couples.

"She'd stumbled across that time-honoured formula one plus one equals two Visa cards with which to hit John Lewis," she says. "Whereas one plus nada equals squat - specifically, the one you're living in. So there's a reason why couples' homes look so grown up and elegant."

And Ms Betts, 39, dismisses Ms Robinson's point that single people can't afford to have fun.

"The one thing they do is have fun. I go out every night whereas some of my married friends never do. Then there's the SWOFTIES - single women over fifty - who like clubbing, twitter and exotic holidays. They don't have pensions but they're having a fabulous time.

"Part of being single is having this carpe diem lifestyle - when you're single one's social life is one's life."

If there's one positive thing that comes out of the study it's debunking the myth that single people are rolling in money, she says.

"It's a reprimand to those couples who say that by dint of not having children you're stinking rich. And that is a huge area of resentment between breeders and lone rangers."

But in the end the materialists are missing the point, she argues.

"It is expensive,but for me it's more 'what price freedom?' The people I know are single out of choice."

Source