Treatment of refund from Revenue

Hi, I will try to keep this simple (my confusing tax issues)
Underpaid tax 1200euro in 2005
Discovered in 2008
Agreed by Revenue to treat as follows: Reduce tax credits by 400euro in 2009, 400euro in 2010 and400euro in 2011(Fair enough)
Requested P21 for 2009 as overpaid 300euro in tax.
Treatment of refund due as follows: Allocate to 2005 underpayment
As a result my credits will only reduce by 100euro for 2011.

I hoped I would get the 300euro refund for 2009 and carry on with reduction of credits to clear the old underpayment as agreed. Am I wrong? Can I write to revenue and ask for the refund and reduce credits as originally agreed?

Its an unusual situation. I think your best bet would be to call Revenue to try and arrange this. However, as the tax is overdue since 2005 and they now have it they may not agree to the refund. But if failure to issue the refund would cause undue hardship on your part then your case for the refund is stronger. Its worth a phone call to them using your best powers of persuasion!

im a tax consultant and see this all the time.sorry but u wont get the refund. they are obv going to clear their debts first.

So am I. And while I agree its unlikely, I think its worth a shot.

Well, its not a large amount and I do owe them tax, so will let it be. Hopefully I still have a job in 2011 when the tax credit reduction wont apply!!!!!

Might I ask what caused the tax underpayment? Also did they hit you with penalties and interest? I'm asking as I have a thread on this myself in relation to a relative.

Bronte, husbands employers accountant said he did not receive a tax credit cert for hubby and used same credits as previous year. Unknown to him I had taken some of hubbys credits and he should have been using a reduced amount for 2005. I would say hubbys employer got the tax cert and did not forward to accountant!
No penalties or interest charged, maybe they only charge this if underpayment is a lot higher?

Strange because I got the impression that if you underpaid, even in error or even if revenue caused it you would still be charged interest as it's statutory.

I'm guessing what has happened in your case is that a friendly word from your accountant to his contact in revenue has resulted in the right button being pressed. Good for you. Particularly as it was a genuine error.

Thanks for posting back.

Bronte said:

Strange because I got the impression that if you underpaid, even in error or even if revenue caused it you would still be charged interest as it's statutory.

I'm guessing what has happened in your case is that a friendly word from your accountant to his contact in revenue has resulted in the right button being pressed. Good for you. Particularly as it was a genuine error.

Thanks for posting back.

Click to expand...

Revenue do not normally charge interest on underpaid PAYE tax. They do on self-assessed Income Tax.

zippidydo said:

husbands employers accountant said he did not receive a tax credit cert for hubby and used same credits as previous year. Unknown to him I had taken some of hubbys credits and he should have been using a reduced amount for 2005. I would say hubbys employer got the tax cert and did not forward to accountant!
No penalties or interest charged, maybe they only charge this if underpayment is a lot higher?

Click to expand...

Tax Credit Certs are normally issued for the year commencing dd/mm/yy and followng years. So if no new cert had been received the husbands employers accountant would have been correct in applying the existing credits into the new year. Unfortunately, as you said, new cert obviously did issue but was probably not passed on.

Where all income is PAYE based, and not self-assessed then no interest or penalties are normally applied by Revenue. You only pay back the original tax due.