Just as the government is rekindling the idea of a taxpayers’ charter, it is also poised to reduce the time limit for reclaiming tax overpayments.

Tucked away in the Finance Bill ­ in schedule 39, paragraph 12 ­ is the proposal that the period during which individuals can recover overpayments of tax should be reduced from six years to just four.

On top of this, the taxman wants to widen its own scope for reclaiming underpayments of tax over the past 20 years.

As well as active negligence or suspected fraud as valid reasons for reclaiming tax, HMRC wants to be able to pursue individuals if it believes they have failed to take ‘reasonable care’.

But Mike Warburton, senior tax partner at Grant Thornton, said this gave HMRC too much leeway. ‘My experience is that if you don’t do exactly what is expected, then they can say you are careless,’ he said.

He also argued that while it would still be tough, it would at least be fair if the taxman proposed reducing the limit for claiming back money from individuals from six to four years.

‘What’s sauce for the goose should be the same for the gander,’ Warburton said.
Tax experts are worried about the unfair advantage HMRC appears to be giving itself with its latest moves.

‘This is really tipping the scales against the poorest-paid taxpayers, who cannot afford to get advice and will not know they have overpaid,’ said Ann Redston, visiting taxation professor at King’s College London.

HMRC’s wish to reduce the overpayment limit to four years is particularly alarming in the light of its track record for mistakes.

National Audit Office figures for 2006-07 show that the tax office made 3.6 million mistakes on self-assessment and 2.8 million on PAYE, with individuals overpaying by £157m.

According to the Low Income Tax Reform Group, 44% of HMRC cases relate to unclaimed tax overpayments that are more than six years old.

Robin Williamson, the group’s technical director, said: ‘There is going to be an enormous number of people overpaying tax, particularly pensioners whose age allowances are missed because the Revenue didn’t get their paperwork in order when they turned 65.’

The lobby group is confident that when the Finance Bill is debated it can convince at least one opposition MP to table an amendment.

‘The only reason for the change is to get symmetry between VAT time limits and income tax following harmonisation of the Revenue with Customs,’ said Williamson.

‘It’s all very well aligning revenue systems but what about taxpayers’ rights?’ he said.