WTC QUERY

CGG_3

I'm 59.  At the end of last year, before I totally cashed in and closed down an old private pension (to pay for a hip replacement operation), I phoned Tax Credits to see if doing this would affect a WTC claim, explaining the money, a one-off cash-in figure of around £14K would go into my account but would be paid out as soon as I had a confirmation of my op going ahead.
I was advised it wasn't of interest to them, (Tax Credits) but I should let them know when I actually receive the funds if indeed I go ahead with the plan.
On the same day the lump sum was credited to my bank account I phoned Tax Credits with the details.
A few days later I received an amended Tax Credit notice stating no payments were due, and in fact an overpayment of tax credits for the tax year now applied.
I felt I was initially poorly informed, but accepted they must be right, so let it go.
Roll on to the new tax year and upon renewal lo and behold, no tax credits are due for this year either. 
Tax Credits used last years earnings to evaluate this years WTC and have again included the 'dead' one-off closing pension payment,  which I obviously won't receive again. 
I rang to update/correct the record with Tax Credits and I've just received an updated TC notice, with my amended award for this year. 
As Tax Credits say phone calls are recorded, would it be worth my while to request they review my initial call to them from last year wherein I was told the lump sum from cashing in my old private pension would not affect my WTC claim?
Thanks.

Dazed_and_C0nfused

I suspect you would be totally wasting your time, if for no other reason than you appear to confusing two things.

I phoned Tax Credits to see if doing this would affect a WTC claim, explaining the money, a one-off cash-in figure of around £14K would go into my account but would be paid out as soon as I had a confirmation of my op going ahead.

Having a capital sum in your account doesn't affect your tax credits claim, that is typically an issue that affects DWP related benefits.

Tax credits awards are based on your income.

I'm sure if you stuck to the pertinent facts i.e. I'm receiving some taxable pension income of £14k* will this affect my tax credits, then you would have got a different response.

*I'm assuming you are reporting the correct amount as what goes into your account usually isn't of any relevance for tax credits.

huckster

You need to ask HMRC to look at this again, as normally one off pension drawdowns don't affect claims, provided the drawdown is used for the purpose you advise them of, within reasonable period of time. 

If you provide them with the pension drawdown information and also any documents regarding the hip operation, they should be able to review the previous decisions.

Dazed_and_C0nfused

huckster said:

You need to ask HMRC to look at this again, as normally one off pension drawdowns don't affect claims, provided the drawdown is used for the purpose you advise them of, within reasonable period of time. 

If you provide them with the pension drawdown information and also any documents regarding the hip operation, they should be able to review the previous decisions.

Are you sure about that?

The renewal notes suggest otherwise,

Other UK pensions you’re getting including occupational pensions or annuities 

(but not tax exempt war pensions).
Use your P60 for details of your occupational pension. 

Phone our helpline if your pension includes an extra amount for work related illness or injury.

peteuk

The problem you have is you phoned them, they aren’t advisors on the phone they just take info.
HMRC will say it’s as much as your responsibility to know the rules as it is theres.
Pension lump sum is classed as taxable income therefore is classed as income for WTC (unless otherwise stated)

Correct this years but i doubt you’ll get far with last years, if there is an overpayment from last year it will be recovered from this years claim

huckster

I stand corrected. I thought that pension drawdowns, provided they were being used for a specific allowed purpose, could be exempted from treatment as income for WTC.

But there is a process to enable the drawdown to be given this exempt treatment.  And in this case, because HMRC have not considered any special treatment, it has been counted as income.

Taxable income from pensions is also income for the purposes of tax credits. (The tax-free element of any pension income or lump sum is not to be included as income for tax credits.)

Was any of the drawdown amount tax free ?

FusionFury

Do they keep phone records from that long ago? 

sheramber

FusionFury said:

Do they keep phone records from that long ago? 

If recorded , calls should be kept for at  least 6 months but HMRC have admitted that not all calls are recorded.

CGG_3

Many thanks everyone for your input. 

In October I fully cashed in the 'frozen' private pension which I had paid into for just a short time during the 1980's.  (Life events then meant I had no spare funds to continue paying into the pension plan).  It sat there 'frozen', with me receiving yearly statements and an occasional change of address notification from me - as over those forty years I'd moved house a few times! 

The total cashed in value was a little over £19800. 
I received almost £5000 of it tax free, and was stopped a similar amount in tax on the remaining £14800+. 
This was the amount I told Tax Credits about, on the day it was credited to my bank account.  (I was advised by them before cashing in the pension that doing so wouldn't affect my joint Tax Credits claim, but to just ring them with the details if I went ahead with the plan). 
I didn't realise it would be classed as earnings for the year and would trigger an amended award to be issued, showing zero allowance for WTC for the year, and an actual overpayment for 2022/2023. 
A short time after this, I also received a P45 from the pension company.  (The figures on which all had a 'P' next to them).
I'm 59, married and no longer work due to worsening osteoarthritis.  I claim no means tested benefits at all.
I put in a claim with the tax office for a tax refund and received almost all the tax back a few weeks later.

I had no idea that those employees answering phone calls for Tax Credits were not actual advisors, with no real understanding of the rules for claiming Tax Credits.  It looks like I  will have to just put this down to experience, but this could just be of interest if anyone else out there is considering cashing in their private pension pot. 
Possibly, in hindsight,  I should've put up with the osteoarthritis pain until being migrated to UC, as I/we won't qualify for that benefit when the time comes to claim.

Icequeen1

You can dispute the overpayment on the basis of incorrect advice - search for leaflet COP 26. Ask them for the phone recording. 

In terms of the next tax year, it will still have an impact as although they will take your estimated income without the pension lump sum, the first 2500 of the fall in income is disregarded so it has some continuing impact. 

IQ