ESCA19 - cherry picking years by tax office

Caketh

Due to the fact that I received Incapacity benefit from about November 2008 I had an underpayment of tax in the 2008-9 tax year. The DWP informed the tax office and I contacted them myself. They did not alter my tax code in 2009-10 or 2010-11 as I was not earning enough to pay tax - I was in receipt of Incapacity Benefit and nothing else. In this tax year I will have been paid pension for nearly 14 months and will have received Incapacity Benefit for a number of months as well so my income is above the tax free threshold. It is NOW that I am being contacted by the tax office as "we were unable to collect the underpayment via your 2009-10 tax code as your income for the year was not high enough".

I am now being told that the underpayment is due to be collected through the 2012-13 tax code starting on 6 April 2012 but that if my income is insufficient in that year (which it will be) someone from the Specialist Payment Team will be contacting me to arrange payment by other means.

I have paid extra tax this year due to the fact that pension payments which I should have received in the last tax year were delayed until this tax year. I am well aware that tax is frequently unfair but is it really right that they obtain tax from a payment if paid timely they would have and obtain tax later when they have been too slow to alter the tax code in order to do so?

agrinnall

It's a bit difficult to work out what you're asking as your final sentence makes no sense. However, you seem to be complaining that tax you owe is being collected next year rather than earlier, is that right? Most people would be happy to delay paying tax for as long as possible but I'm sure if you're desperate to pay it earlier you could contact HMRC and request to do so.

Caketh

Sorry to have been unclear.

My complaint with the tax office is that the tax was due in 2008-9. They were told about it by the DWP and I contacted them myself at the time.

I was paying tax that year.

2009-10 I didn't earn enough to pay tax (£5078.43 in Incapacity Benefit)
20010-11 I didn't earn enough to pay tax (£4840.73 in Incapacity Benefit)
20011-12 I am paying tax as I started being paid my work pension in April 2011 but it was back dated to early February and I am in receipt of Incapacity Benefit until 1st August this year. As I believed that the ESCA19 rule applied to me because they had done nothing about collecting the tax until they contacted me in November 2010 so consequently that they had to write it off I disputed their request for payment. I also believed, it would appear erroneously, that spare tax free allowance would at least reduce the tax liability. From 2012-13 tax year onwards my income will be well below the tax free allowance until I receive state pension (this was originally to be February 2014, then moved to January 2018, now probably November 2019) so I believed that due to one thing or the other the tax would be written off.

I feel particularly aggrieved because I have paid tax on my February and march 2011 pension payments which i would not have paid had I received them in the correct tax year (2010-11).

My question is - do I need to pay this tax back or is there a way not to pay it?

jennifernil

Have you asked if the backdated pension amounts can be assigned to the correct year for tax purposes? (no idea if this is possible)

jem16

Caketh wrote: »

My complaint with the tax office is that the tax was due in 2008-9. They were told about it by the DWP and I contacted them myself at the time.

So when you contacted them at that point what did they say or do?

As I believed that the ESCA19 rule applied to me because they had done nothing about collecting the tax until they contacted me in November 2010 so consequently that they had to write it off I disputed their request for payment.

The problem is that for ESCA19 to apply, you have to have believed that your tax affairs were in order. Obviously you knew that they were not as you contacted HMRC to tell them of the new source of income.

During the next two tax years when you knew you were not earning enough to pay tax, did you contact HMRC to arrange to pay the underpayment? If not why not?

I also believed, it would appear erroneously, that spare tax free allowance would at least reduce the tax liability.

Only tax being paid could reduce a tax liability.

I feel particularly aggrieved because I have paid tax on my February and march 2011 pension payments which i would not have paid had I received them in the correct tax year (2010-11).

That's not HMRC's fault though. It's your pension provider's fault. Why was there a delay?

My question is - do I need to pay this tax back or is there a way not to pay it?

You owe the tax and you have known since November 2008 that you owe the tax but have made no effort to pay it. So yes I do feel that you need to pay it.

Caketh

As you appear to know more about tax do you happen to know whether I can ask the tax office to 'reassign' my pension which was paid in tax year 2011-12 back to where it should have been paid in 2010-11?

I had a dispute with my employer (along with my two colleagues and I do mean my two colleagues rather than two of my colleagues) which commenced in July 2007, resulted in the first grievances going in in April 2008, the first Employment Tribunal applications in November 2008, and a settlement agreed in early February 2011 (about a month before the start of the 2 week ET hearing) which resulted in my early retirement that took them two and a half months to pay out in respect of the pension.

jem16

Caketh wrote: »

As you appear to know more about tax do you happen to know whether I can ask the tax office to 'reassign' my pension which was paid in tax year 2011-12 back to where it should have been paid in 2010-11?

You may be able to get HMRC to apportion the monies and apply them to the year that they are due. You would need to write to HMRC and explain that the payment is the back payment of pension that was not originally given at the time it was earned. You would also need a breakdown from your pension provider of exactly how much of the lump sum payment applied to each tax year.

This might help explain.

http://www.hmrc.gov.uk/manuals/pommanual/PAYE70023.htm#IDAT1JKB