What would you do if someone came knocking on your door demanding over £500? Would you invite them in for a friendly discussion to sit down and work out the calculations used to reach this figure.. or would you tell them to shove it and crawl back under the rock they came from? Having recently watched a TV series (on catchup, no tv licence required) which followed a team of court bailiffs; I’ve seen plenty of such reactions and they’re not pretty.

So why is it then that time and time again we hear stories of people ignoring letters from HMRC or the IRS with demands for miscalculated tax payments? Worse still.. here in the UK this organisation has the power to take the money without a fight. A simple adjustment in your tax code and the additional money is siphoned off throughout the year without many ever noticing.

The joy of tax codes

I recently had the pleasure of being on the receiving end of such a miscalculation which claimed I owed them almost £750! To be fair; I was aware that money was not being taken off for the tax on my company car and had been expecting a letter from HMRC informing me of such.. however you can imagine my surprise and confusion when 2 letters arrived on the same day containing 4 different tax codes and demands for 2 different amounts of unpaid tax. What a mess.

It seems in it’s wisdom of calculation, the all powerful computer system at HMRC had decided to spit out codes 954L to 750L to 951L to 167L. For the benefit of our American friends (and the many Brits who are equally confused by the tax code system) this means future deductions of £92 to £500 to £98 to £1666! Ouch.

So I busted out the calculator and tried working out what I actually owed and where things had gone wrong. The annualised tax due on my current company car (soon to be replaced by something much cheaper) is about £950 a year. I’d been working at my new job for 3 months now without paying this tax, so my rough calculations put me at an underpayment of (£950/12)*3 = £237.50. And yet on the back of their letters, HMRC were claiming I owed them almost £750.

Time to get on the phone

I think the problem with any government run customer service department is that they know you have no choice but to be their customer. Unlike utilities or shops who rely on a positive customer experience.. good old HMRC know that I’ve got no other alternative but to use them and so will shameless leave me waiting 40 minutes in a call queue before eventually getting through to a human. That’s 40 minutes of my life I’ll never get back.. but for £500 its a sacrifice I’m willing to make.

I eventually go through to a knowledgeable sounding gentleman who, upon hearing my concerns, proceeded to go into depth about how company car tax works and that I really did owe them money.

“Yes, I know how it works.. and I know I do owe you something.. but it sure as hell aint £750 in just 3 months!”

Even he agreed that this amount seemed high. He put my on hold for a worrying length of time before eventually coming back that my calculations seemed correct and some undisclosed Computer Error must have made a cock-up somewhere. My tax code would be readjusted and £500 more would be coming to my bank account instead of the government’s.

And so the moral of the story: Always read your post! Especially from people who can take money from you without even asking.