GOV PENSION WOMENS REFUND

iow74

You are quite right the DWP have not deducted tax at source and neither had they the slightest interest in discussing my wife's potential tax liabilities . As I have informed the local council of the lump sum I am pretty sure they regard the whole sum as " theirs " -- and would have no interest whatever in my wife's potential tax liability -- The principle as I see it -- why should my wife pay the tax man be it £1 or several hundred pounds for the privilege of having a DWP refund from a government error in her bank account . I do not know her liabilities at the moment but I do know the council will get first pick --  it's know good telling the tax man sorry the monies all gone back to the council -- they will get whatever  they consider  owed on the lump sum via tax codes --- similarly I bet if she went to the tax man first and paid them from the lump sum -- the council would say the whole lump is ours and would reduce your benefits to compensate for any monies you may give to the tax man --  Multiply my wife's scenario by many thousands and you have the makings of a real mess--  consider also many women who may well have started spending the money unaware of their liabilities to both parties. 

NedS

I would either declare the lump sum net of tax if you know what the tax liabilities are, or would declare gross and notify the council that is a gross figure and there will be tax liabilities on it and you will notify them of the net amount once tax has been deducted/paid. It is absolutely not reasonable that you should be left worse off / with a debt as a result of a refunded pension payment. You can't be expected to receive a £10k gross refund, pay £2k in income tax on it and give £10k to the council leaving you £2k out of pocket.

calcotti

It's a mess isn't it.

iow74

Neither the tax office or the council will want to be out of pocket -- the tax situation has already been raised in parliament and decided upon back in June --as I said my conversation with the council indicated strongly that they consider all of the lump sum as theirs to claw back-- so in a contest like that who do you think will win -- I suspect it won't be my wife !!--  Once I get a written response from the council I can try as suggested to raise the tax implications but I'd bet a pound to a penny they will say your wife's tax bill is hers and hers alone and of no interest to us. I have raised the issue with my MP yesterday afternoon -- whose assistant seemed totally bemused by the potential of my wife being out of pocket by receiving a pension error refund. I will update on any responses.

Robbie64

Would your wife be liable to pay income tax? The lump sum will presumably cover arrears from a number of tax years. In any of those tax years will her revised taxable income for that year exceed the tax-free (personal allowance) limit?

iow74

To be totally honest ROBBIE64 we haven't got that far yet , whether she ends up owing £1 or several hundred it's wrong  -- quite frankly we are cheesed off with the whole scenario -- if the council confirm  in writing that the lump sum is income --which I am sure they will -- then we would rather give it all back to the DWP and then neither the council or the Inland Revenue will get anything and we return to the status quo -- I doubt however that things will be that simple. 

Dazed_and_C0nfused

iow74 said:

To be totally honest ROBBIE64 we haven't got that far yet , whether she ends up owing £1 or several hundred it's wrong  -- quite frankly we are cheesed off with the whole scenario -- if the council confirm  in writing that the lump sum is income --which I am sure they will -- then we would rather give it all back to the DWP and then neither the council or the Inland Revenue will get anything and we return to the status quo -- I doubt however that things will be that simple. 

Is your wife not getting an increase for the rest of her life, not just a single arrears payment?

TELLIT01

Once those due money have been identified, how will beneficiaries be identified when the pensioner has since died? 

iow74

Yes of course she will get an increase weekly from now but that is fairly straightforward pension goes up benefit goes down -- it's the lump sum that appears to be the issue.

NedS

iow74 said:

Neither the tax office or the council will want to be out of pocket -- the tax situation has already been raised in parliament and decided upon back in June --as I said my conversation with the council indicated strongly that they consider all of the lump sum as theirs to claw back-- so in a contest like that who do you think will win -- I suspect it won't be my wife !!--  Once I get a written response from the council I can try as suggested to raise the tax implications but I'd bet a pound to a penny they will say your wife's tax bill is hers and hers alone and of no interest to us. I have raised the issue with my MP yesterday afternoon -- whose assistant seemed totally bemused by the potential of my wife being out of pocket by receiving a pension error refund. I will update on any responses.

Yes, I get it, the council have a right to claw it back because it's income. BUT, you have to pay income tax on income (that is not optional), so they only have a right to claw back NET income AFTER tax. You need to determine your tax liability so you can make a rational argument how much NET income as a lump sum you have received. Tax is your responsibility, not that of HMRC's who are only responsible for collecting it. Work out how much tax is due on the lump sum for each tax year in question, pay the tax due to HMRC and go from there. The Council will have a hard time arguing with you. If they don't agree, I'd feel fairly confident arguing that position in a court of law.
Rhetorical question - how do the council treat your other taxable income? Do they treat is gross before tax, or net after tax? This is no different.