Tax Underpayment in 2010 - collected by reducing tax credits in 2012/2013

[Ceist Beag]

I recently had tax returns sent to revenue for additional income received last year. I received back a balancing statement which states that the underpayment for 2010 will be collected by reducing my credits in 2012 and 2013. This is the first time revenue has indicated it will collect the underpayment in this manner - usually I have until October to pay the amount owed. Does anyone know why there is a change in policy and is there any benefit in my paying the amount this year rather than letting it roll forward via reduced credits in future years? I would prefer to pay it off personally but would be interested in hearing other opinions and I'm also curious why there has been a change in collection policy by revenue.

 

[mandelbrot]

This is quite common with people who are PAYE workers.

Since you received a balancing statement as opposed to a notice of assessment I presume you are talking about a Form 12 rather than a Form 11 tax return.

Generally, where the additional liability is below a certain threshold amount, Revenue will just collect by reducing tax credits in future periods.

There hasn't been any major change in collection policy AFAIK, just perhaps your liability this year crossed below the threshold? Or maybe they've increased the threshold.

As for my opinion, if it were me I'd happily let them reduce my credits, as it's effectively interest free finance...

 

[Ceist Beag]

Thanks mandelbrot, that clears things up a bit. Yes I'm a PAYE worker and indeed, the additional liability is quite a bit lower this year compared to previous years so it sounds like I have come in below the threshold amount this year. In terms of pay now, or later, I guess I just prefer to pay debts when I have the money rather than reduce my credits down the line - as no doubt the credits will be hit next year by the budget!

 

[thesimpsons]

just ring up revenue and tell them you want pay by cheque and they'll be delighted to take the money. Alot of people wouldn't have ready money to pay it off so reducing credits is an easier way in those cases.