'Painless' pledge over unpaid tax
The Government will seek to claw back unpaid income tax "as painlessly as possible", Exchequer Secretary David Gauke has pledged.
Outlining a series of measures designed to ease the pain on the hardest hit, Mr Gauke nevertheless told MPs he did not want to raise people's hopes that they could escape repayments.
With almost £2bn owed as a result of a HM Revenue & Customs blunder, Mr Gauke said the country "simply cannot afford" to write off all of the underpayments.
The intervention came after HMRC started sending out nearly six million letters to individuals who paid too much or too little income tax.
Around 4.3 million people are due a rebate, but some 1.4 million will have to hand over an average of £1,428 each.
Updating MPs on the situation, Mr Gauke said: "In total the Exchequer is owed approximately £2bn. Being left with the worst deficit in peacetime history means we simply cannot afford to write off all of these underpayments. To ensure that the tax system is fair for everyone, where everyone pays their fair share, we are taking action to recoup these funds as painlessly as possible."
Those owing under £2,000 will have the money deducted from their salaries on a monthly basis from next year, Mr Gauke said, while people owing more than £2,000 would be contacted by HMRC to discuss payment options - though he stressed that "no immediate one-off payment" would be required.
The letters were being staggered between now and Christmas to make the system manageable, he said.
And he added: "In cases of genuine hardship, HMRC will allow payments to be spread across a period of three years. As was already the case, HMRC will not pursue cases where the amount owed is for less than £300 - that's an increase from the previous threshold of £50 - and this applies to 40% of all underpayments.
"And of course in specific circumstances HMRC will consider writing off underpayments where it can be shown that HMRC was provided with all the information necessary - although I have to tell the House that from historic experience, this is unlikely to apply to many cases and we do not want to build up people's hopes unrealistically."