Many clients may have received a brown envelope from HMRC stating they are due to make an additional payment of income tax. To recap - HMRC is sending out a number of calculations (forms P800) to individual taxpayers showing if they have paid too much or too little PAYE tax for the years 2008/09 and 2009/10. HMRC is looking at two years together because the 2008/09 reconciliation was postponed until the new National PAYE Service was up and running.

Under and overpayments for 2008/09 and 2009/10 are not necessarily errors (though some of them may be wrong) but are the result of HMRC reconciling open PAYE years in a way it has not done for some time.

However if a client or a practitioner believes that HMRC should have already collected the tax due in a Tax Calculation (P800) because the information had already been provided and HMRC have failed or delayed to use this information, then in some limited circumstances HMRC may agree not to collect it.

Extra Statutory Concession (ESC) A19 allows HMRC to do this and it only applies to individual taxpayers who owe Income Tax. It does not apply in any other circumstances where amounts owing to HMRC are in dispute.

The circumstances are that HMRC should have used the information provided within 12 months after the end of the tax year in which it is received.

HMRC have published detailed guidance explaining the conditions that must apply, who to contact in HMRC if they do and what information will be required.

The list below shows information that HMRC would normally use to adjust a tax code to make sure the right amount of tax is paid:

• Details of a change in income
• A new job or additional job
• A taxable benefit provided by an employer, for example a company car
• An employee starting to receive a work or private pension
• Receipt of state retirement, disability or widow's pension

This list is not exhaustive and each case will be treated on its own set of circumstances. This information can come from a variety of sources.

The time limit which applies for ESC A19 is where HMRC have failed to use information received, within 12 months after the end of the tax year in which it is received.

For example: on 1 August 2008 HMRC received information about commencement of a new pension in tax year 2008/09 and the end of that tax year is 5 April 2009. HMRC should have either issued a tax code or sent a tax calculation for the above receipt of information before 5 April 2010, which is 12 months after the last day of the tax year 2008–09.

The same time limits apply for any over-repayment of tax that is made in error and HMRC asks for the tax to be paid back. However, if no information has been received then ESC A19 cannot be considered.

In exceptional circumstances, arrears notified less than 12 months after the end of the relevant tax year may be considered where both of the following apply:

• HMRC failed to make proper use of more than one piece of information received about a source of income
• HMRC allowed tax arrears to build up over two whole tax years in succession – so at least two tax year underpayments are due

HMRC will consider the facts and circumstances of any claim that this concession may apply to and decide whether it was reasonable to believe (prior to receiving the Tax Calculation) that a taxpayers affairs were in order.

If a practitioner wishes to claim this concession on behalf of a client, then the procedure is to telephone HMRC on 0845 300 0627 indicating that a claim is being made under ‘ESC A19’. The following information will be needed:

• what tax year and underpayment the claim relates to;
• what information HMRC failed to make proper and timely use of and any supporting information;
• what date this information was provided;
• reason(s) why the taxpayer believed their tax affairs were in order prior to receiving the tax calculation.

Whilst there is no legal right of appeal against HMRC's decision, it is possible to ask for another officer to review the decision made.