Halifax have caused me to lose my ISA allowance

jamiex

How much compensation, if any, should I be requesting from Halifax for this error?

• Full year's subscription for 2010/11 made in one ISA
• Transfer this ISA to Halifax within the same tax year.
• Halifax make an error and tell HMRC full year's subscription is made on transfer date, so HMRC have been told by two banks that I've subscribed the full amount on two separate dates and think I’ve oversubscribed.
• HMRC write to me to tell me that they will instruct Halifax to void the subscription, and I should write to them with proof with in 30 days. In hindsight I should’ve obtained proof from Halifax and done this, but I phoned Halifax and they say that they will sort it out as it was their mistake, and I don’t need to do anything.
• A month later HMRC instruct Halifax to void the subscription and Halifax comply.
• I phone Halifax again and find they’d closed my original complaint. A new one is opened. A couple of months later they write to me with a final response that tells me I have to take it up with HMRC as they’re just acting on their instructions.

I have now written to HMRC with proof but from their point of view the case is closed so it is doubtful that I will get a resolution.

If HMRC won’t do anything I have effectively lost £2500 of ISA allowance (as for some reason they partially voided the ISA rather than taking the full £5100 out – I have no idea why).

I bet nobody has ever seen this kind of problem before. How can I calculate how much I've lost? I'm only 24 do I claim for 40 years lost tax!?

Regards,
Jamie

MoneySaverLog

jamiex wrote: »

How can I calculate how much I've lost? I'm only 24 do I claim for 40 years lost tax!?

Who's to say you were not planning to leave this here in a ISA forever, where it would earn interest on interest tax free over decades. Halifax should fix the error.

bigadaj

Logically they should effectively pay the tax for you and so increase the interest rate, this becomes tricky if you pay above standard rate of tax though. This would be fair as you aren't penalised, and if you do withdraw the sum them the problem is finished, this is probably too complicated though and they will offer a lump sum, see what that is and then post again for opinions on whether reasonable, obviously take it to the regulator if there is no progress.

bigadaj

This problem does happen from time to time, search on these boards and you might find a couple of examples, I would say co,pension for tax on interest over ten years would be reasonable.

opinions4u

Compensation wise I believe that the FOS will typically look at 5 years lost tax allowance.

So somewhere around £2,500 x 3% x 20% x 5 = £75. Double for a 40% tax payer.

But you should also be asking Halifax to fix their problem (with HMRC agreement). If they can't, in addition to compensation for loss of tax allowance you should also be asking for a goodwill payment. I'd start the bidding in three figures.

innovate

Crikey, this sounds a nasty one! You are right, this could be about the loss of your tax exemption for the next x years -- and 40 is not a bad number of years to use, given your current age. How much that would be depends on loads of factors - interest rate and tax legislation being just a couple. You can use this calculator to play around with some numbers.

Before I make any suggestions on what to do next, can you clarify the numbers a bit further please because I am not sure I fully understood

1. how much was in the old ISA
2. how much did you transfer and when
3. what happened to the £2,500 that was voided?
4. did you ever pay anything into the ISA? if yes, how much and when?
5. how much is in the ISA now?

xylophone

http://www.hmrc.gov.uk/isa/bulletin10.htm

opinions4u

xylophone wrote: »

http://www.hmrc.gov.uk/isa/bulletin10.htm

Xylophone, you post some excellent links.

It would be great if you'd add a sentence to help pinpoint the key information within what are often long winded or wordy web articles.

jamiex

innovate wrote: »

Crikey, this sounds a nasty one! You are right, this could be about the loss of your tax exemption for the next x years -- and 40 is not a bad number of years to use, given your current age. How much that would be depends on loads of factors - interest rate and tax legislation being just a couple. You can use this calculator to play around with some numbers.

Before I make any suggestions on what to do next, can you clarify the numbers a bit further please because I am not sure I fully understood

1. how much was in the old ISA
2. how much did you transfer and when
3. what happened to the £2,500 that was voided?
4. did you ever pay anything into the ISA? if yes, how much and when?
5. how much is in the ISA now?

I transferred the whole of the old ISA into the new ISA.

£15,985.61 was transferred in, which is what was in the old ISA plus any interest accrued at the time of the transfer. This transfer happend on 10th March 2011 (I'd paid £5100 into the old ISA on 28th April 2010).
Nothing further was paid into the ISA in that tax year.

£2,342.96 + £29.57 was voided from my ISA. The £29.57 was paid in tax to HMRC, and the £2342.96 was paid into my current account (which, by the way, was left there at 0% interest for around 6 months while I was waiting for them to sort the problem out).

The balance is now £15,639.53 (as I did make some contributions in the 2011/12 tax year)

ChiefGrasscutter

You need to reject Halifax's answer.
Their's is the standard 'blame third part excuse'.
Followed by the Nuremburg defence of "we were only obeying orders"

As it is the Halifax that messed up, it is THEIR responsibility to sort it out and not try and pass on the blame and make you sort it with the third party (HMRC).

Rather than compensation for unknown years at unknown interest rates you need to demand you are restored to the original correct position.
If this means re-opening ISA's and backdating everything then they have the power to do this in conjunction with HMRC in the event of a mistake by them.

jamiex

ChiefGrasscutter wrote: »

You need to reject Halifax's answer.
Their's is the standard 'blame third part excuse'.
Followed by the Nuremburg defence of "we were only obeying orders"

As it is the Halifax that messed up, it is THEIR responsibility to sort it out and not try and pass on the blame and make you sort it with the third party (HMRC).

Rather than compensation for unknown years at unknown interest rates you need to demand you are restored to the original correct position.
If this means re-opening ISA's and backdating everything then they have the power to do this in conjunction with HMRC in the event of a mistake by them.

Halifax have already made it clear to me that they are unable to help, as they have to comply with what HMRC have told them, despite this being because of their error. I did call to reject their final response and that's what they told me.

I think my outcome depends entirely on HMRC. If they allow it to be fixed, then I get back to my original position, and I should get some compensation for my time and inconvenience. If they don't, then I should also be compensated for the loss of tax free allowance. That's where the difficulty lies in knowing what's fair.

I have given the Financial Ombudsman Service a call, and they're sending me something to fill in and sign.

By the way, Halifax have given me £50 so far for the inconvenience. I definitely think that's far too low!