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Over the coming months’ five million people around the UK will be sent revised tax coding notices from HMRC for the tax year 2010-11. Tax already paid will need to be adjusted (upwards or downwards) retrospectively. Due to the enormous number of taxpayers involved, the implications of this will be felt by many people currently in a trust deed.
In excess of three million people could expect to receive a refund that could be as much as £320. However, around a million people will be asked to pay additional tax (with a typical figure being around £500). We assess what this will mean for those affected that are currently in a protected trust deed.
If you are lucky enough to be informed that you have overpaid tax, you are likely to receive a letter and a cheque in July. It is likely that your trust deed provider will consider such a payment to be a windfall of sorts and they may therefore require you to pay the sum over in order that it can be used to help repay your creditors.
Failing to notify a Trustee of such a windfall is likely to be a breach of the terms of a protected trust deed. This could have serious consequences and is likely to be picked up via the review process used during the course of a trust deed.
Those who are less fortunate will receive a tax demand which is likely to be posted to them in September or October. Paying such a demand will clearly be difficult while operating from a restricted budget in a trust deed.
The first step for anyone who receives an additional tax demand should be to contact their protected trust deed provider. They will be able to provide guidance on what steps should then be taken.
Depending upon your precise circumstances such steps might include the new HMRC tax debt becoming a trust deed creditor, your trust deed payment being suspended temporarily so that you can pay the tax, or an arrangement being made with HMRC to repay the debt over an affordable period.
Whether you receive a tax refund or a tax demand, communication with your Trustee is of paramount importance. This will assist you in moving forwards without your trust deed being jeopardised as a result of HMRC errors in the way they calculate PAYE tax codes.Tags: hmrc, protected trust deed, tax, trust deed