Issue with 10/11 and 11/12 tax

Ms_Brush

Hi all

I have intervened in an ongoing tax issue that my elderly Dad has been unable to solve. There were several problems, some of which I have started to resolve and some I need a bit of help with.

my Dad was made redundant in May 2010, aged 67, and joined another firm as a consultant, essentially going self employed for the first time in his working life. He was also drawing his state pension. He retired completely in July 2011, and his only income since then has been his state pension. He has been completing self assessment tax returns ever since, but we have an unresolved issue dating back to this tax year. I have been with the accountant he was using today to try and understand what tax he owes.

Essentially, somewhere along the line, the self assessment for the 10/11 tax year was completed and the figure my dad was told he owed was £1,792.40 which was duly paid. This was made up of £1194.80 for 10/11 and £597.40 for a first payment on account for 11/12. However, it now appears that HMRC had amended the tax due to £2,550.60 for 10/11 as a result of information that they held, but it appears that they did not write to inform my dad or the accountant of this.

Then, in 11/12, the first tax year after my dads retirement, his self assessment calculation came out at £286.80 for the year. HMRC have the 11/12 tax due as £663.80, and again, there is no record of this from them in writing to my dad or to the accountant.

The 12/13 and 13/14 tax year calculations from the SA and from HMRCs records both agree - these are £292.80 and £349.20 respectively. We have a discrepancy with 14/15 as the transferred tax allowance from my Mum has not been taken into account so I am expecting an adjustment from the £415 that has been calculated.

My Dad had paid £349.50 and £151.50 over the last couple of years, so there is still some tax due, but at this stage we are still trying to figure out how much. These figures have been credited towards the 10/11 tax year, but there is still approx £350 showing as outstanding for that tax year.

The net effect of all this is that HMRC want £2,048.90 paid in back tax, and a further £1100 in interest and late SA return penalties. I have written on my Dads behalf to the to appeal the penalties ( he has given them full authority to deal with me), but we haven't heard back yet.


I know that ignorance is no excuse in taxation, and I was unaware of the scale of the problem until a couple of weeks ago when I intervened and spoke to HMRC. They had no idea of his age and failing health, and seemed to be treating him as a tax dodger rather than an elderly man with no clue as to how the tax system works.

The other mitigating circumstances here is my Dad's health. Since he retired in 2011, he has had a hernia op, a double heart bypass, a knee replacement, a ruptured Achilles' tendon and pneumonia. He is also pretty deaf and unable to hear anything on the telephone. All in all, he is vulnerable now, and not able to deal with this at all - hence my intervention.

By my calculations, given that it took both myself and the accountant over an hour to figure out where the issue was, and that the accountant and my dad were unaware of the £1100 of tax due over and above the SA calculations from 10/11 and 11/12, the tax he has paid should mean he owes somewhere in the region of £850. The only correspondence my dad has been receiving has been increasingly aggressive late SA penalty letters, demands for payment with no explanation of what the payment was for, and a couple of debt collection agency letters, despite my Dad and the accountants writing several letters asking for explanations, which have not been forthcoming. I have no issue with actually paying the outstanding amount, but it would be helpful to know what it should be!

What I need to know is where do we stand with this, and what is my best course of action now?

What grounds (if any) do we have for any appeal, how far back can we get them to look, and what else do I need to watch out for or be doing to get this sorted out?

Thank you all in advance.

xylophone

http://www.thisismoney.co.uk/money/experts/article-3732831/ASK-TONY-HMRC-sends-pensioners-threats-nasty-bullying-letter-simply-misunderstood-tax-system.html


http://www.litrg.org.uk/tax-guides/employed/what-if-i-do-not-pay-enough-tax

http://www.taxvol.org.uk/

Darksparkle

What transferred tax allowance are you referring to for 2014/15?

If marriage allowance, that didn't start until 2015/16.

Has his accountant tried calling HMRC and discussing it with them?

Ms_Brush

Yes, the transfer I was referring to is the marriage allowance. My understanding from when I spoke to HMRC that this would reduce the 14/15 liability - it is possible that I misunderstood this.


The accountants have spoken with HMRC and have got nowhere either. My dad stopped using them about 2 years ago because his tax affairs should be really simple - it is just his state pension. The complication does seem to be that in 10/11 he was made redundant in may 2010, so had salary under PAYE, he had a redundancy payment (under 30k so shouldn't have been taxable), his state pension and he went self employed. From the accountant's perspective they calculated everything based on all my Dads paperwork, this was signed off and agreed, and £1792.40 was paid to HMRC - but it seems as though my dad's income and HMRC's records did not match. There is nothing at the accountants, in their records, or in any of my dads paperwork to suggest that HMRC thought he should be paying £2550.60 in that tax year. The first alert he got was a stream of letters while he was in hospital asking for the rest of the money. My dad had written several letters around this time, and had no replies from them. Obviously this has compounded as time has gone on, but this is the crux of the problem. He had no idea that there may have been an issue with the return or the calculations, and therefore was not aware he owed anything for that tax year. The same applied to a lesser extent to 11/12, as he only worked for about 2-3 weeks during that tax year and then he retired through poor health.


As I say, the subsequent years calculations are okay, and are pretty straightforward. The issue is that all payments since the initial £1792.40 haven't been enough to even cover what HMRC calculated he owed for 10/11.


Even after spending time with the accountant yesterday, who spoke to HMRC while I was there, we are still not really any the wiser as to why their calculation was £800 higher than the accountants for that tax year, and why HMRC didn't respond to the letters sent by my dad at the time.


The annoying thing is, that if they were right and he still owed a bit more for that tax year and had been told we wouldn't have a problem now. Even the accountant said that the lack of information coming back from HMRC in this case was unusual.


All I want to really know is where do I go from here, and what can I do to get this sorted?

[Deleted User]

Little to say other than - if the accountant does not know how to sort this I would seek an alternative. He/She should be able to handle this through to a conclusion. Perhaps one who has a tax specialism?

xylophone

Have you tried here?

http://www.taxvol.org.uk/

Ms_Brush

Yes, contacted them already - they answered within a few hours and they have been passed on to Tax Aid, a different charitable organisation who specialise in self assessment for people on a low income. So, great call, thank you!

Ultimately, whatever needs paying isn't really the problem. What I really want to do is ensure that whatever the final position is, that I can be confident that it is right and I know what went wrong, and why.

Darksparkle

[Deleted User] wrote:

Little to say other than - if the accountant does not know how to sort this I would seek an alternative. He/She should be able to handle this through to a conclusion. Perhaps one who has a tax specialism?

Ditto to this.

I've never known an accountant who hasn't been able to resolve something like this.

Normally if a tax return is wrong HMRC will tell you why eg you told us your earnings where X and our records show Y.

If you don't agree with Y and still believe X is the correct figure then you'd normally send them your documentation to confirm.

Ms_Brush

Right, I understand what has happened now. I spoke to the accountant again to clarify, they have emailed me a whole load of their file documents and I have spoken to HMRC myself.

The issue appears to be that some state pension had not been included in the 10/11 tax return, but HMRC for some inexplicable reason failed to advise either my Dad or his accountant that more tax was due than my dad's accounts indicated that year. I have not completely figured out why there is a discrepancy for 11/12 yet, but this could be a similar reason I guess. So my Dad had paid what he was told to pay, in good faith and he had no idea that it wasn't the right amount. When he started getting additional demands, he wrote several times to ask HMRC for explanations. His letters don't appear to have been acknowledged and his questions answered, so with those answers still outstanding while he was seriously ill, it got left, and it has obviously now escalated.

So, now I understand what went wrong, and with this missing info now confirmed over the phone by HMRC it looks as though the figures are likely to be correct. however, neither my dad or the accountant have anything in writing linking the £1782 that was calculated to their amended outstanding figure of £2660 for that tax year. The question now is whether the revenue are supposed to advise you if they have additional info, and if they don't advise you, how are you supposed to figure it out without the benefits of any sort of explanation?

Are there any grounds for complaint anywhere over the lack of meaningful and understandable correspondence dating back to 10/11?

And more importantly, how do I go about sorting this mess all out?

Thank you
S

xylophone

http://www.rossmartin.co.uk/private-client-a-estate-planning/income-losses-claims-reliefs/943-extra-statutory-concession-a19

may be worth a look.

Gather full details of all your father's income for the disputed tax years.



Check the Personal Allowance for those years and any other Allowances for which your father may have been eligible.

(He was aged 67 in 2010-11 so check the figure shown for Age Allowance on chart below which may have been applicable but was gradually withdrawn where income was over a certain level.).

http://www.rossmartin.co.uk/tax-guides/117-tax-rates-and-allowances

https://www.moneyadviceservice.org.uk/en/articles/do-you-have-to-pay-tax-on-your-redundancy-payout

Download and print off a couple of Tax Return Forms and the notes and guides.

http://webarchive.nationalarchives.gov.uk/20111030144753/http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?formid=2999&record=zrjxag2mt_0

http://www.tenbury-international.co.uk/Blank_files/declaration%20d%20impot%202011.pdf



Fill them in to give yourself an idea of his income and tax due.

Darksparkle

Ms_Brush wrote: »

Right, I understand what has happened now. I spoke to the accountant again to clarify, they have emailed me a whole load of their file documents and I have spoken to HMRC myself.

The issue appears to be that some state pension had not been included in the 10/11 tax return, but HMRC for some inexplicable reason failed to advise either my Dad or his accountant that more tax was due than my dad's accounts indicated that year.

Have HMRC confirmed that they didn't notify your dad or his accountant?