HL made an error with SIPP but want money back

Fluffybunny

Hi, I've received notification from HL that they made an error with an amount I contributed to my SIPP with them. They say I wanted it Gross, but they applied it as a net amount and got tax relief for me. They now say they made an error and want me to sell some of my invested assets in order to cover the refund back to HMRC.  This doesn't seem right to me. They made an error, but did I make the initial error by saying 'gross' not 'net'?  And if they made the error anyway, why should I sell some of my shares, potentially at a bad time?

Murielson

What do the investment Ts and Cs say about errors? Imagine they have it covered off somewhere

dunstonh

They now say they made an error and want me to sell some of my invested assets in order to cover the refund back to HMRC.  This doesn't seem right to me

Seems right to me.   i.e. they are putting you back in the position you should have been in had it never occured.

 They made an error, but did I make the initial error by saying 'gross' not 'net'?

You could have made the initial error as these things tend to be automated based on what you input.   They could have made the error too but you haven't given us the details to say either way.   It should be pretty easy to find out by looking at your account and the disclosure documents issued at the time.

And if they made the error anyway, why should I sell some of my shares, potentially at a bad time?

Is it a bad time?   We are pretty near recent highs.

xylophone

They say I wanted it Gross, but they applied it as a net amount and got tax relief for me. 

You knew that you were making a gross contribution and instructed HL to this effect?

Therefore you knew that you had no right to tax relief?

Did you yourself realise that tax relief had been claimed and credited in error? Presumably not, or you would have made HL aware, yes?

It is immaterial that HL made the error - it is you who owes HMRC the money.

If you don't want to sell shares, can you not make a direct payment to HL?
 

Hoenir

Why didn't you contact them at the time of receiving the tax relief.  In addition kept this money aside retained as cash. Knowing that you weren't entitled to it. 

Albermarle

Plus why did you request to make a gross payment, which is a bit unusual for an individual ? 

Fluffybunny

Hoenir said:

Why didn't you contact them at the time of receiving the tax relief.  In addition kept this money aside retained as cash. Knowing that you weren't entitled to it. 

I didn't know until I received their letter a few days ago and I do have cash in the account. Therefore I didn't know I wasn't entitled to it and your message sounds a bit accusatory, but thanks anyway.

Fluffybunny

Albermarle said:

Plus why did you request to make a gross payment, which is a bit unusual for an individual ? 

Thanks but I don't remember doing that but I'm clearly a novice when it comes to SIPPS as it was my first payment. I may have made the error, and I don't know why it is unusual for an individual to make a gross payment. I'll have to look that one up and ring HL.

Fluffybunny

xylophone said:

They say I wanted it Gross, but they applied it as a net amount and got tax relief for me. 

You knew that you were making a gross contribution and instructed HL to this effect?

Therefore you knew that you had no right to tax relief?

Did you yourself realise that tax relief had been claimed and credited in error? Presumably not, or you would have made HL aware, yes?

It is immaterial that HL made the error - it is you who owes HMRC the money.

If you don't want to sell shares, can you not make a direct payment to HL?
 

Thanks but I wasn't aware. I don't doubt that if payment has been made to me in error then it needs to be repaid. And yes, I can make a direct payment I presume. Thanks.

Albermarle

Fluffybunny said:

Albermarle said:

Plus why did you request to make a gross payment, which is a bit unusual for an individual ? 

Thanks but I don't remember doing that but I'm clearly a novice when it comes to SIPPS as it was my first payment. I may have made the error, and I don't know why it is unusual for an individual to make a gross payment. I'll have to look that one up and ring HL.

The main benefit of adding to a pension is to gain tax relief on the contributions, which more than compensates for any tax you pay on withdrawal.
However if you make a personal gross contribution, there is no tax relief added, but you are still liable for tax on withdrawal. So by adding amounts that do not get tax relief there is a negative tax benefit, so normally you would not do it.
In fact it is so unusual, many pension providers simply can not handle personal gross payments.

xylophone

I am now sensing that there is some misunderstanding about pension contributions and tax relief.

Are you under age 75?

Do you have "relevant uk earnings" higher than £3,600 gross per annum?

Do you/your employer currently contribute to a scheme other than your SIPP?

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100#IDAN30KF