Help! Tax underpaid....again

mandymel

I received notice from the tax office last year saying I'd underpaid my tax by £703. I accepted this and have been paying it over the last 12 months.

Now I'm being told I've underpaid again by £815! This time however it's different. I'll summarise below:

In October 2010 I had a letter from Heir Hunters looking for my late husband, Ed. I wrote and told them he'd passed away. They then sent me a form to complete which I did and sent back. I then received a cheque with an employee joining and employee leaving form. I didn't think anything of this. It said if I did self assessment I should send it to my tax office. I don't, so didn't! I did pay basic rate tax on it. I then got another cheque for late payment funds which again I paid tax on.

Now the tax office have me down as being employed by LV for 1 day and as such have used this lump sum as part of my allowed earnings.

My question is, can I say it can't be classed with my earnings as I was never employed with them as it was my late husband's policy?

BoGoF

What exactly what is Heir Hunters paid you - the proceeds of an insurance policy?

More info is needed as to what the payment related to but it seems odd that they have reported it as earnings to HMRC.

Mikeyorks

mandymel wrote: »

.... have used this lump sum as part of my allowed earnings.

Was the phrase 'chargeable event' used anywhere? And are you sure - if that is the case - it has given rise to more tax liability? As you would need to have been pushed into 40% liability - if not already there - for that to happen.

anigma

yeah that's right. it actualy appreciates the principal value.

mandymel

The covering letter received says:

We would like to advise you that we are now in a position to pay the claim on this policy. A cheque for the amount of £5075.81 will be sent to you under separate cover in full satisfaction of the lump sum death benefit. This payment includes late payment interest, of which a tax certificate will be sent under separate cover for your records.

Enclosed is a P45 showing the tax deducted. This tax deducted may not be the right amount due when all of your income for the year is taken into account. After the next 5 April HM Revenue & Customs (HMRC) will check whether you have paid the correct amount of tax and if not they will contact you.

If you think you have paid too much tax you can ask HMRC for a tax refund now - you don't have to wait until 5 April. To claim a refund call your usual HMRC office and ask for form P53A. You can find the numbers on the 'contact us' pages of the HMRC website at .....

As per The Registered Pension Schemes (Provision of Information) Regulations 2006 (SI 2006/567), it is the responsibility of the Personal Legal Representative to carry out a check against the member's personal Lifetime Allowance upon death.

As policy number .... was an Appropriate Personal Pension policy and the benefits are being paid as a trivial lump sum it doesn't need to be tested against the member's Lifetime Allowance.

If you have any further queries.....


I hope this helps, thanks.

BoGoF

So it relates to a pension in respect of your late husband by the sounds of it.

Were you given the option of taking a pension or commuting it to a lump sum under the 'trivial pension' rules?

mandymel

No options were given to me.

TBH I didn't even know about this policy. I returned a form to them and they sent me a cheque, which was a huge surprise!

BoGoF

A lot of pension schemes contain a provision for a pension to be paid to a surviving spouse which then becomes the income of the spouse, I assume that is what has happened in your case.

mandymel

So that would mean I don't have any option but to pay the outstanding tax to HMRC?

That's rubbish :-(

Mikeyorks

But you haven't given any detail of the outstanding tax? As the insurance / pension is taxed at source ...... also the interest. Then one assumes the extra income has pushed you into 40%. Or the 2nd year underpayment ....... is for the same reason as the 1st one?

But without any figures - it's a guessing game?

ganja-farmer

Today l got a letter from hmrc saying l underpaid for 2008/09 £4559.80
i have checked my income from my p60s (l have 2jobs) its £63530 and i paid a total of £11478.20 in tax my final taxcode for that year was 613L on my main job and BR on my second job. I also have a letter dated 13 jan 08 when hrmc said my employer from my main job would apply taxcode 553L for April 08 to april 09. In 2010 l wrote to them asking if l had overpaid and on 26 January 2011 they said I had large underpayments happening every year however due to the circumstance under which the underpayments arose they had decided not to pursue the underpayment and if they offered calculations it could cause the underpayment become due for collection. Looking for advise before l respond to them. thank you