Home Responsibilities Protection (HRP) have to pay tax?

Bilbo2010

My Mum has recently received notification from the DWP that she is getting a lump sum because of the Home Responsibilities Protection (HRP). What would be the situation with regards to tax? I am just concerned she gets this lump sum and then later on down the line she gets a demand for tax. (Sorry not that clued up on stuff, so any help appreciated).

Mrs_Money

I'm not quite sure what you mean by a lump sum for HRP? My understanding of HRP is that it protects your NI payments whilst you are not working and are at home looking after children (it kicks in all the time you receive Child Benefit, but parts of years where you have done some work are not covered). HRP means that when you come to claiming State Pension - you don't have any NI payments (years) missing.

How old is Mum? If she is in receipt of SP it could be that there has been some mistake in calculation of her paid NI years - perhaps she had paid more than they originally thought? This would then mean she could be due some repayment of pension arrears? A friend of mine has just had this happen- she queried her HRP record and finally got more SP than she had originally been receiving.
If this is payment of arrears, then the only way they could be taxed is if she has enough income to pay tax already (for the years the arrears are payable) - so this would then count as income for taxable purposes, I think.
Hope that helps!

Bilbo2010

Mum is 73 and retired receiving state pension. As far as I understand she received a form to see if she had been eligible for HRP from the DWP. She completed this form and they sent a letter back stating she was eligible for the years between 1978-1984. So I understand (though I may be wrong) her state pension had been underpaid, hence the lump sum. But I assume this would of been underpaid since retirement age (60).

She just gets (as far as I know) her state pension and doesn't pay tax. But a lump sum in one tax year would push her over her allowance. If it had been spread over the years outstanding she would of still been within her personal allowance if you know what I mean. (Again sorry not that clued up on these things so terminology may be a bit wrong)

So my concern is that as a lump sum, if it is considered income, she will have to pay tax. I just want to make sure she doesn't spend it all and then get a bill from the tax man

Mrs_Money

Yes, I see your concern, common sense would say if she's not a taxpayer, then there's no way she should be paying tax on this as you say, if this lump sum was spread over the years it is owed from then her income would not have exceeded her personal allowance!
But I've heard that if you ring your local tax office with a query, they are very helpful. I think you just need reassurance that this matter won't rear it's ugly head later down the line - so a phone call may be the answer.

Bilbo2010

OK thanks.

jam2028

Hi,

My mum is in exactly the same situation as yours was & i just wondered what the outcome was for you? She has been to the tax office who are unable to give her a clear answer!
Many thanks

xylophone

http://www.hmrc.gov.uk/manuals/eimanual/EIM74103.htm

Does this help at all? (Although with regard to operating PAYE State Pension is always paid gross.)