my mum who is 63 owes £3000 to inland revenue..help!

dundeetinker

hi my mum got a letter this morning saying she owes the inland revenue £3000 due to a lump sum she got from pension credit she didnt have a clue about it..now im just wondering what her options are can she pay them up or will they just demand the money in full i'm so worried as she has her own home and they might force her to sell her home..hope someone can help..

chrismac1

Firstly, please post the details of their calculation - they've made a lot of blunders recently....

dundeetinker

hi chrismac she got a lump sum in 2008/09 but this bill is stated for 2009/2010 because they made a mistake saying she was owed her state pension for 3 years which came to
£17,480
on the letter today it says she now owes them
£3496 underpaid tax
other figures on her letter are
her income was 29,000
income after deductions
was £11,583
tax they deducted was £10,021

her personal allowance was £6475

she is so worried about this she is a widow my dad died 7 years ago so she is on her own with this im worried for her..

dundeetinker

my only question is would they give her time to pay this up or will they just force her to sell her home..

Mikeyorks

I'm afraid your posts are confusing. First you indicate it was 'pension credit' that caused an underpayment (unlikely ..... as it's not taxable). Now it's arrears of State Pension? Which makes it difficult to help.

Can you set out the details as they are shown on the P800 .... rather than freehand - as that will make it easier. And indicate if your Mum deferred the State Pension deliberately ..... or the arrears are an oversight.

HappyMJ

dundeetinker wrote: »

my only question is would they give her time to pay this up or will they just force her to sell her home..

If that's your only question then yes they will allow her to spread the payments generally no more than the time period that the amount was accrued over. They will as a last resort put a charge on the house. They won't force her to sell it. Sometimes they do but as she's 63 I would doubt it.

dundeetinker

Thanx happymj it puts my mind at rest it was acrued over the 3 years since she turned 60 she didnt know anything about the state pension till they contacted her to say she was entitled to 3 years of it ang they gave her it in a lump sum of 17,000 and thats why they want 3 years of tax from it now as it was untaxed when they gave my mum it..

sorry mikeyorks its a bit jumbled lol i wrote it down as she told me over the phone once i get the p800 i will write it down properly thanx for replying.

Mikeyorks

It's not the case they will agree to collect the tax over 'the period of accrual'. Nor is it the case they will - outside of bankruptcy - put a charge on the house. And they certainly won't sell it.

Now you've qualified that the bulk payment was 'arrears' rather than deferral (which has its own rules). Pension payments are taxable when accrued ..... not when paid (generally). And at face value your figures initially make it appear she's been charged a chunk at 40% ...... which would not happen if it was apportioned to the right years. But that's contradicted by the fact the pension arrears appear to be £17,480 ...... and the tax on that at exactly 20% would be precisely the underpayment you mention of £3,496.

If that's correct - then no point asking HMRC to re-apportion the pension arrears to the right years. Unless - in one or more of the 3 years your Mum didn't pay tax? If she paid tax in all 3 years then the re-apportionment would simply produce the same underpayment overall. So not much point. But post the accurate figures from the P800 in order someone can check?

Meantime I'll assume the underpayment is correct. In which case (a copy is enclosed with the P800) you need to read this :-

http://www.hmrc.gov.uk/p800/flyer.pdf

... with particular emphasis on Page 2 - as here :-

If you cannot pay your underpayment, or collecting it through your tax code would cause you financial difficulty, [FONT=VESED H+ IR Modena,IR Modena][FONT=VESED H+ IR Modena,IR Modena]it is important that you contact us as soon as possible using the address or phone number on your P800 [/FONT][/FONT][FONT=BAPPW G+ IR Modena,IR Modena][FONT=BAPPW G+ IR Modena,IR Modena]Tax Calculation [/FONT][/FONT][FONT=VESED H+ IR Modena,IR Modena][FONT=VESED H+ IR Modena,IR Modena]and we will discuss options for you to pay.[/FONT][/FONT]

On a curious note? DWP normally tell HMRC when a State Pension starts to be paid .... so they can issue a Pension enquiry form (P161) and code it out. Where arrears are paid - in such a sum as this - I would be surprised if DWP didn't include a caution with the calculation to the effect a tax underpayment will be created - and provision should be made? As the tax on such a large payment of arrears can't be collected in the year if other income is limited.

dundeetinker

thanx a lot mikeyorks i will let her know and once i get her letter i will post it in detail, so you dont think she will lose her house then.

Mikeyorks

dundeetinker wrote: »

so you dont think she will lose her house then.

Absolutely not.

Post the P800 details back for a fuller check. As the figures are a bit mangled to say the least! You might also post her Code number for this year (2010-11) in order we can check the State Pension is being correctly taxed and no further underpayment is accruing.

dundeetinker

thanx again mikeyorks i can maybe get a sleep tonight now lol i will get the letter from her and post it on here.