Tax underpayment demand £3500

geoffken

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[FONT=&quot]Just rec'd letter claiming £3500 underpaid for 2009 and 20010 and adjusted code for 2011.
Situation
Took early retirement in 2001 Yes 2001 but became eligible for pension on 2 10 2009 on 65 birthday.
Worked before and after this date for agencies who knew I was receiving company early retirement allowance and taxed me on BR rate 20% on all earnings.
No earning above 30.000 in any year so no 40% liability.
It appears DWP did not inform whoever that I was receiving standard OAP from 2 10 2009.
They admit on coding letter "an incorrect amount of state retirement pension was include in your tax code" for both years.
Their P800 letter states "if they (government) have made a mistake then they may possibly agree not to collect it. Summation of para as have no scanner to quote completely.
As i have no reason to believe that one govt dept did not talk to another do I have any redress or ability to not pay this.
Am happy to pay now they/me are aware of situation.
Cannot put hands on £3500 so can if necessary pay over longer period via tax if not successful in appeal not to pay.

Will be ringing tomorrow but wanted advice first or should I consult MP if no satisfaction [/FONT]

chrismac1

There are various stages here, and various other posters have been through this sort of thing - Google "Esc A19" and search for posts about it on this site. My feeling is you should end up OK for 08-09 and maybe 09-10 depending on the timelines.

I suggest the following process:

1. Are these assessments or merely calculations? I have two clients who just had letters, in one case coming to £4k or so. This was a year ago, I advised them to sit tight awaiting a formal assessment - none yet, so no tax to pay.
2. Get the calculations checked, either professionally or by posting the details from your P60 on this site.
3. If they turn out to be wrong - which is quite common - then you can appeal.
4. If they are correct then its "Esc A19" for you.
5. Note that standard procedure with Esc A19 and other letters challenging HMRC is that they simply knock out a form letter saying "get lost yours faithfully HMRC" in tax-speak. No problem. Keep on going until you get a reply which at least demonstrates someone has bothered to read your letter. This can take 3 or 4 efforts, what you are looking for is an amount of money or other detail which is specific to your case and not just general tax-speak.
6. There have been cases on this site and others where after 5 or 6 letters over the course of a year HMRC have finally caved in. Persevere!

geoffken

Thanks for this.
A great help.
Spoken to tax office and they will have case referred to "higher authority"
So looks like they are unsure of their ground otherwise as you say they would say "tough".
Advised decision likely in 3 weeks.
Have accepted liability for 2011/12 via new tax code 246
As cases refer to both 2009/10 and 2010/211 am I right in assuming that because they did not pick up 2009/10 until now then I could be eligble for relief for 2010/11 because of their "incompetence" ie 2 year rule..
Thanks again from 1 MSE to another

chrismac1

In these cases their main attack point is whether the taxpayer took "all reasonable steps" to inform HMRC of their affairs. The "reasonableness" test in itself is a "hot" area where HMRC have been losing Tribunal cases I am sure they thought they were going to win. For example it was held to be reasonable not to pay HMRC a tax bill in order to pay key suppliers.

This could be seen as a digression, but it is my way of saying that I believe you are on rock solid ground on the "reasonableness" test. The timelines though could be a problem, where you siad "2009" before I took this to be tax year 08-09.

As long as you did everything your employers and pension providers asked of you, HMRC had all the information necessary to get your 08-09 tax right by early June 2009. The concession applies where HMRC failed to use the information within 12 months of the end of the tax year they had the information, which takes us all the way up to 5 April 2011. So if your initial letter started with tax year 08-09 you are OK, if it started with 09-10 then they still have until 5 April 2012 to get it right. Yes I know it seems a long time and yes I know there is no way they ever accept this sort of thing from taxpayers without hefty fines, but there it is - and strictly they see it as a concession. There is usually no sense from HMRC staff that making a Horlicks of tax then hitting people with big bills could in anyway be seen as a poor example of public service.

System

HMRC usually issue a P161 Pension Coding Form when a taxpayer is approaching 65 so that they can find out if the taxpayer has any employment, if they intend to claim their state pension at 65 or defer it to a later date and the details of any other pensions due to commence. The form is also used to find out the level of the taxpayers income to work out if they are entitled to their full age allowance.
If they sent you one and you didn't return it then they would not have been aware of your circumstances (level of your state pension) and would have been unable to correct your tax code accordingly and prevent the underpayment arising.
It might be worth your while asking HMRC if they sent one to you.

Niggles

You might like to look at the following two links referring to 11 January 2011 announcement in Parliament.
http://www.publications.parliament.uk/pa/cm/cmtoday/cmwms/archive/110111.htm#d2e19
http://www.litrg.org.uk/News/2011/paye%E2%80%93good-news-and-bad-news
However I belive that as chrismac1 says I think this referred to pensions started in 2008/9.
As yours started in 2009/10 you do seem to fall into the within two year rule.

geoffken

Thanks for this great factual info.
Have bookmarked pages for ref if HMRC get stroppy although these guidelines indicate that they should not be pursuing me.


Thanks again for easing my mind.

geoffken

Update.

HMRC have written off 2009 but have refused exemptions for 2010/11.

Just received letter dated 10 Feb in reply to mine of 21 December appealing for ESC A 19 for 2010/11 for £2312.80.
They state a notice of coding change was sent to me on 2 May 2010.
NEVER RECEIVED!!.
They also state "Unfortunately a notification of coding was NOT issued to my employer but it is my responsibility to ensure affairs are in order and notify if not."
How can I know I should have received a tax code and surely they have failed by maladministration.

As original retirement date was 02/10/2009 then mistake was made then and 1 year ruling would be April 2010 plus 1 year.
Their mistake was then compounded by NOT checking alleged May 2010 code was applied by my company pension payroll dept.(same company).
Can anybody advise next steps.
THANKS

jennifernil

They are still well within time for tax for 2010/2011, after all self assessment returns for 10/11 only had to be in by 31/01/2012, and tax paid by that date.

Even without a notice of coding, surely you would realise that getting an additional source of income would mean paying more tax and that you should let someone know if nothing had changed?

I think you did well getting the 09/10 tax written off!

geoffken

Jenifernil.
Thanks for this but have been paid by same company/pension since 1974 /2009 so self employment does not come into it.
As pension exceeds tax allowances as married then surely HMRC should be deducting tax at source anyway.

Thanks for your input.

chrismac1

Geoff, I have several clients in their 60s and 80s in the same boat. Plenty of people in this country have had a lifetime within PAYE where over a 20 to 50 year period there were no problems, no dirty great tax demands.

What has changed all of a sudden in the last 5 years or so? Not the nature of the taxpayers. Not the nature of the tax system in any fundamental sense.

Just Hideous Muddles from Right Charlies.

It's just not good enough to say "the taxpayer has to be in complete command of their own affairs." Maybe if there was a culture of that in the UK then fair enough. But I have clients in their 20s who have even less of a clue about how the tax system works, so it's not as if anyone in Government can even claim they are making a start in the re-education process. And to expect it of folk over 60 is really taking the Mickey in my view.