Issue with 10/11 and 11/12 tax

Ms_Brush

Got a bit of an update today - HMRC have cancelled all the penalty charges that have been accruing, and added a file note to my Dads account noting his various health issues.


I am still waiting for the Subject Access Request to come back, but not expecting that for another couple of weeks yet.


Looking through the papers and figures again, it does appear that the tax due for 10/11 rose from £ 1194.80 to £1355.60, which would be consistent with the additional income that looked as though it was missing from the original return. However, it looks to me as though the £1355.60 was added to the account rather than adjusting the £1194.80 - which would account for the massive difference between what I calculated and what HMRCs figures show.


How likely is it that HMRC would make this sort of schoolboy error?

Wayne_O_Mac

Ms_Brush wrote: »

How likely is it that HMRC would make this sort of schoolboy error?

Given that all this started because your dad didn't fill in his return properly, I don't think it's fair for you to be accusing others of 'schoolboy errors'

Ms_Brush

I am finally getting somewhere with all this, and I think I have finally unraveled the problem and found the source issue.

Essentially, when the 10/11 tax return was completed the state pension figure used was just the basic state pension without the additional payments. Whose mistake this was originally does seem to have been lost in the depths of time and confusion.

After many calls and letters between myself and HMRC, including receipt of the SAR information which has given me some understanding of what has gone on, I now know where the issue is. When the mistake was originally realised and HMRC made the adjustment to the 10/11 return it looks like two things went a bit wrong. Firstly, their tax calculation system seems incongruent with their written information, and the explanation of the new taxable amount was never sent to either the accountant or my dad. So when the new demand came in, the accountant has questioned how they got to the taxation figure and never got a satisfactory answer, because the figure used by HMRC is wrong, and therefore the taxation amount is also wrong. It is the incorrect taxation amount that they have been chasing my dad for ever since.

The state pension figure that both HMRC and I have now confirmed is correct was £10,500, which when added to his earnings gave him a total income of just over £22k, which falls below the age related personal allowance threshold that was in place at the time. This made the tax for the year approx £2k, of which £1700 had already been paid.

For some reason, which I am still waiting for an explanation for, is that in the adjusted tax calculation, a state pension figure of £12,700 was used, taking the total income over the age related personal allowance threshold, and the total inflated income was then subject to the reduction in personal allowance which applies when the income is higher than £22,900 - so in effect a double whammy has been applied - income inflated by £2k and the personal allowance dropping from the approx £9k it should be to just under £8k. The total taxable amount On HMRCs system using the incorrect state pension income is £2550, some £500 higher than it should be.

Over time,not looks like this figure has been taken as gospel and all HMRCs actions since have been based on this "underpayment", which has of course been compounded by interest and the various debt collection letters etc - that I have since found out should not have been applied so aggressively because he is classified as vulnerable and in need of additional support.

I was also interested to see in the SAR that the accountant had consistently questioned the new figure for that tax year and not had a response or explanation, and their records also show that my dads disabilities and poor health were also showing from 2012 but he was only classified as vulnerable formally when I started making a fuss in August 2016. The reasoning was that as he had an agent listed (who hasn't been actively employed by my Dad since 2013) that the support wasn't necessary.

I started looking at this in July, and we are now in the last week of October, and I am only just getting to the point where some resolution is possible. I have pointed out to them that I feel he hasn't had the help or service he should be entitled to expect as a tax payer, let alone someone classified under their own rules as vulnerable, and that such a simple issue to sort out shouldn't have taken a concerned family member so long to unravel, particularly as the accountant has been telling them for 4 years that the outstanding tax figure looked wrong.

Bearing in mind that the 'official' debt is £700 (not including 2014-15) and most of that is as a result of the incorrect figure being used in the calculation, what are HMRC likely to do now, and what sort of response should I be looking to use?

Any advice appreciated.

Cook_County

Ms_Brush wrote: »

I am finally getting somewhere with all this, and I think I have finally unraveled the problem and found the source issue.

Essentially, when the 10/11 tax return was completed the state pension figure used was just the basic state pension without the additional payments. Whose mistake this was originally does seem to have been lost in the depths of time and confusion.

After many calls and letters between myself and HMRC, including receipt of the SAR information which has given me some understanding of what has gone on, I now know where the issue is. When the mistake was originally realised and HMRC made the adjustment to the 10/11 return it looks like two things went a bit wrong. Firstly, their tax calculation system seems incongruent with their written information, and the explanation of the new taxable amount was never sent to either the accountant or my dad. So when the new demand came in, the accountant has questioned how they got to the taxation figure and never got a satisfactory answer, because the figure used by HMRC is wrong, and therefore the taxation amount is also wrong. It is the incorrect taxation amount that they have been chasing my dad for ever since.

The state pension figure that both HMRC and I have now confirmed is correct was £10,500, which when added to his earnings gave him a total income of just over £22k, which falls below the age related personal allowance threshold that was in place at the time. This made the tax for the year approx £2k, of which £1700 had already been paid.

For some reason, which I am still waiting for an explanation for, is that in the adjusted tax calculation, a state pension figure of £12,700 was used, taking the total income over the age related personal allowance threshold, and the total inflated income was then subject to the reduction in personal allowance which applies when the income is higher than £22,900 - so in effect a double whammy has been applied - income inflated by £2k and the personal allowance dropping from the approx £9k it should be to just under £8k. The total taxable amount On HMRCs system using the incorrect state pension income is £2550, some £500 higher than it should be.

Over time,not looks like this figure has been taken as gospel and all HMRCs actions since have been based on this "underpayment", which has of course been compounded by interest and the various debt collection letters etc - that I have since found out should not have been applied so aggressively because he is classified as vulnerable and in need of additional support.

I was also interested to see in the SAR that the accountant had consistently questioned the new figure for that tax year and not had a response or explanation, and their records also show that my dads disabilities and poor health were also showing from 2012 but he was only classified as vulnerable formally when I started making a fuss in August 2016. The reasoning was that as he had an agent listed (who hasn't been actively employed by my Dad since 2013) that the support wasn't necessary.

I started looking at this in July, and we are now in the last week of October, and I am only just getting to the point where some resolution is possible. I have pointed out to them that I feel he hasn't had the help or service he should be entitled to expect as a tax payer, let alone someone classified under their own rules as vulnerable, and that such a simple issue to sort out shouldn't have taken a concerned family member so long to unravel, particularly as the accountant has been telling them for 4 years that the outstanding tax figure looked wrong.

Bearing in mind that the 'official' debt is £700 (not including 2014-15) and most of that is as a result of the incorrect figure being used in the calculation, what are HMRC likely to do now, and what sort of response should I be looking to use?

Any advice appreciated.

You have - it seems - established that HMRC made a mistake and the accountant tried to get this corrected. You'll need to formally ask HMRC to pay all of the accountants fees for this work.


Separately, see if the calculation can be corrected to the correct figures and all of the penalties removed.


Given that you use the word "vulnerable", I hope your dad still has capacity to instruct you at the moment or, alternatively an LPA has by now been executed and registered.

xylophone

Given that you use the word "vulnerable", I hope your dad still has capacity to instruct you at the moment or, alternatively an LPA has by now been executed and registered.

Indeed - post 21.

https://www.gov.uk/guidance/complain-to-hm-revenue-and-customs