HMRC taxed Ex Gratia payment

edited 14 February 2018 at 4:51PM in Reclaiming Mortgage Fees, Council Tax, etc
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DienexDienex Forumite
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Hello everyone,

On the 31st October 2012, my father passed away from sepsis while on business in India.
The company he worked for as a goodwill gesture gave my Mother his future commission and equal to 6 months salary which we were most grateful for, but as the company was based in the USA they sent the money via payroll as they deemed it as the fastest way to get the money to us, unfortunately, it was taxed by HMRC. I would like to add that the payslip that the payment is shown is dated 19 Nov 2012, after he passed away and is stated under the description "Ex Gratia" (done from a sense of moral obligation rather than because of any legal requirement.) My Father was PAYE and was fully up to date with his tax when he died.

My Mother enquired to HMRC (sometime in 2016) and was told it was a taxable income so did nothing about it.
After a few difficult years for us, we started to question if the money was indeed taxable.
My Mother contacted HMRC's bereavement line September 2017 and they told her it was not a taxable income, that my father had overpaid tax for this tax year, and to make a claim. We made a claim ASAP and it was rejected on the 13th October with a letter addressed to my Father.

"Dear Mr. Morgan

Thank you for your letter which was received in the office on the 22 September 2017.
I am unable to accept your repayment claim, as from the 6 April 2012 (PAYE) customers have four years to send repayment claims.

Unfortunately, the date for claiming tax back for the 2012-2013 tax year expired on the 5 April 2017."

Since then we have had multiple phone calls with different people from HMRC and received 3 more letters, all of which are signed by different people, and one which requests for more information. The most recent letter we received states:

!!!8220;7th Feb 2017

Unfortunately, even though the payment was made as a goodwill gesture the time limit for claiming a refund expired 5 April 2017 and your first contact with us was September 2017 by telephone.

Therefore we are unable to process your claim.

I apologize for the confusion caused by our request for more information."

So HMRC have taxed a non-taxable amount, but because we were grieving and didn't address the matter sooner, there fighting to keep it. This money would not have been given to us if my Father had not died.

We have been doing some research and found this:

If you think you have overpaid tax in tax years that are !!!8216;closed!!!8217; to reclaims, there is a rule known as Extra-statutory Concession B41 which can allow HMRC to repay tax for those earlier years.
This concession only applies in situations where HMRC or another government department, such as the Department for Work and Pensions, have made an error in your tax affairs and where there is no doubt about the facts of the case.
The relevant part of the concession reads as follows:
!!!8216;....However, repayments of tax will be made in respect of claims made outside the statutory time limit where an overpayment of tax has arisen because of an error by HMRC or another Government Department, and where there is no dispute or doubt as to the facts.....'
We think this applies to us as HMRC made an error by taxing the Ex Gratia payment and we can prove this with evidence.

We also found this bit of information:
You can accept a late claim or election if
a person was unable to deal with their tax affairs due to illness or other good reason, and
the illness or other cause prevented them making the claim or election within the time limit time and prevented them from seeking assistance.

We think this also applies to us as all of us have struggled with anxiety and depression and have not been well enough to work, let alone deal with this. Any help or advice on how to proceed would be most appreciated, we feel we are entitled to this money and we know he would want us to fight for it.

Kind Regards,


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