Their Mistake - My Pocket

fallen121

In September 2005 I was asked by my tax office to fill out a ‘Tax Review Form’ for the year ended 5th April 2005.

The notes accompanying the ‘Tax Review Form’ advised 40% taxpayers to tell the tax office about any pension contributions they were making. As I had recently become a 40% taxpayer, as requested I listed my company pension contributions on the form and enclosed photocopies of my salary slips as evidence when I sent it back.

Since 16th December 2005 I have been receiving additional tax relief in respect of these company pension contributions but I've always felt a bit uneasy about this and recently decided to take a bit of professional 'free' advice. The advice I got was to call my HR department (which I did) and what they told me rocked me rigid. Because my company pension is deducted BEFORE tax, I already receive tax relief so shouldn't have been entitled to the tax relief in the first place!

Trouble is, this has been backdated to March 2004, so although I've since written to the Revenue enclosing copies of absolutely everything, I'm going to get hit with a HUGE bill, and this is going to cause me no end of problems. Money is tight as it is.

My point is this: I've never lied about anything and I don't profess to be an expert when it comes to pensions. As I see it, THEY made the mistake - shouldn't I be entitled to some leeway about repayment here? After all, I've done my best to alert them to their own mistake!

chappers

I don't believe that will be the case, there will be documentary evidence that you sent the form back with your payslips, if they have made a mistake, I'm sure they will accept to reclaim the money through your tax code.
What jimmo is saying is the finite legal position but as he also says there are real people behind the system and I believe you have a clear case,. Maybe you could get an accountant to handle it on your behalf, this will give them less oppertunity to walk over you.

fengirl_2

I am writing to endorse what jimmo has said. Chappers completely misunderstands the self assessment system which is just what it says - the tax payer him/herself provides the information and HMRC issues tax demands based on that. Under SA, returns are accepted without documents to back them up and in fact the info on returns is data captured by very junior staff. It is therefore up to everyone to take care when completing returns - or face the consequences if they (or their advisor) make a mistake.

System

Rather than a self assessment tax return it sounds to me as though you have been sent a P810 Tax Review Form.

This form is usually sent out every 2 or three years to taxpayers who used to have to complete a tax return simply because they fell within the 40% tax bracket due to their PAYE income. Those taxpayers no longer have to complete tax returns unless their PAYE income exceeds £100,000 or they have other sources such as self employment, income from land and property etc

The P810 is generally issued because at some stage in the past the taxpayer has indicated one of the following on a tax return and HMRC are checking to see if anything has changed:-

1. Income from savings and investments which would be liable for 40% tax

2. Charitable gifts upon which tax relief would be given

3. Private pension contributions (not deducted by employer) also upon which tax relief would be given.

When HMRC reassess the relevant years and tell you how much you owe you can negotiate with them regarding how long you want to pay it back over via your tax code.

chappers

I fully understand the SA tax system, but have been in an almost identical situation to fallen121, where through a mix up somwhere between myself, my accountant and the then IR I had been paying the wrong amount of tax for a number of years, due to an incorrect tax code. When finalising my books as a sole trader my accountant noticed the mistake and informed the IR, they agreed to collect the tax back through my tax code.
Of course if mistakes are made you must face the consequences, but if you have mitigating circumstances there are methods other than penalties, fines and demands for immediate repayment that HMRC can and do employ.

ctm_2

Listen to what Pam says. A Tax Review Form is indeed a form P810, and is not part of Self Assessment. You will therefore not be subjected to an enquiry, and interest and penalties will not be charged.

Any amount owing will be collected through your tax code in a future year, unless the amount if greater than £2.5k.

fallen121

First of all, thank for all your replies. Much appreciated!

jimmo wrote: »

I’ve never heard of a “Tax Review Form

Pam17 wrote: »

Rather than a self assessment tax return it sounds to me as though you have been sent a P810 Tax Review Form.

'Tax Review Form' is what it said on the top of the form, and Pam17 is right, it has the number P810 printed on it. Jimmo, I find it somewhat worrying that, as a retired Inspector of Taxes, that you have never heard of this form? It doesn't exactly inspire me with confidence in my dealings with the Revenue!

jimmo wrote: »

If you go in with all guns blazing that its all the taxman’s fault, then frankly you’re on a loser.

Actually, what I sent them was a copy of the original form I filled out, copies of the note that accompanied the form, which clearly states that 40% taxpayers should declare 'any pension contributions', copies of all my payslips going back to March 2004 so they could see where I got my figures from and a nice letter asking them to please look into this.

I was just following the guidance notes to the letter, and I needed to make this clear. There was never any intention to defraud, I just do what I'm told. I would never even THINK of going in 'guns blazing' as you suggest.

My point is this: if you have a guidance note which says 'note all your pension contributions' and you make a note which says' I pay such and such into my company's pension scheme X by direct deduction from my salary and I enclose the payslips', then it is a bit rich for the Revenue to then turn round and say. "Sorry, but you should have realised from reading our rather vague guidance note that we specifically exclude from this all company pension schemes where tax is already deducted at source at the correct rate".

Imagine you had slices of homemade cake and an honesty box and you asked people to leave what they thought the cake was worth once they'd eaten it. Then suppose people came along and left an average of 50p per slice. You'd look pretty silly if you then came along and complained because they didn't leave at least £2.50. You should have specified a minimum.

The Revenue should have specified quite clearly what they meant by 'pension contributions'. Instead, they expect people to be pension experts and know that company schemes are specifically excluded, presumably by a process of mental telepathy. THAT'S what I'm complaining about. Fengirl is right when she says we should all take care when completing these forms, but guidance notes are there to explain to the uninitiated what they should do, so they should GUIDE, not confuse. If I had never read the guidance note, then I would never have tried to claim what wasn't mine. I just thought it was another piece of information they needed to know. I was being HONEST.

jimmo wrote: »

The person who deals with your Enquiry will be earning a fraction of what you earn and will be hard pressed to appreciate your difficulty in repaying.

Please don't assume that all 40% taxpayers are fatcats. I have a family to support. I don't take expensive holidays or have my kids in private school. I got onto the housing ladder late in life, and most of my cash goes on paying the mortgage, the council tax, insurances and food. I have a long commute every day (because like most people, I can't afford capital city house prices) and not much option about using public transport (much as I would like to) because of the location of my office and the hours I work, so I get stung for car tax, petrol and car insurance. I drive a 7 year old Ford Focus.

I'm perfectly willing to pay up, even though it WILL mean having to go without a few things. I'm just resentful that once against it's honest Joes like me who end up footing the bill because someone couldn't be bothered to write guidance notes which clarified the position properly from the start. And yes, it will make life harder because I'll have to pay it back over a much shorter period than I enjoyed the benefit of the extra cash.

noh

I'm just resentful that once against it's honest Joes like me who end up footing the bill because someone couldn't be bothered to write guidance notes which clarified the position properly from the start.

But you are better off than if the mistake hadn't been made. Its HMRC who will be footing the bill as they have not had use of the money refunded to you since 2004.

Nigel

fallen121

noh wrote: »

But you are better off than if the mistake hadn't been made. Its HMRC who will be footing the bill as they have not had use of the money refunded to you since 2004.

Nigel

Yes, but they will get it back. And I am sure they will find a way to charge interest. I'd love to sympathise with them , but I can't :rolleyes:

Let's suppose the mistake left me better off by £40 a month over 4 years. If I have to repay via PAYE over 12 months, to my little brain that equates to £160 a month. That's a significant chunk of my mortgage repayment. And before anyone jumps in to suggest I move to a smaller house to save money, I will clarify things a little by explaining that I live in a terraced ex council house with not much room to swing a cat. I don't have an en-suite bathroom, or utility room or even a garage. I just exist. Isn't that what nearly everyone is doing these days? Well maybe not Victoria Beckham, although I hear she's finding LA terribly lonely these days. Poor lamb. :rotfl:

ctm_2

jimmo wrote: »

I think that legally you are on dodgy grounds but a bit of skilful negotiation could work wonders.

Please stop saying things like that. He is NOT on any dodgy legal grounds. There is very little that is 'legal' about the PAYE system inthis case, unlike Self Assessment where there are penalties, interest, surcharges, due dates, enquiries etc.

This is a simple case of a misunderstanding that fallen121 is now correcting. All that is going to happen is the years where he received the relief that was not due will be re-assessed, he will be sent the calculations, and the amount will be collected through his code in a future year, assuming that the total is less than £2.5k. It's too late for it to be collected through your 2008-09 code, which is the year that starts in a few days on 6 April, so will be collected through your code starting from 6 April 2009.

It's not much consolation, but that means you have all this year to perhaps save a bit each month, so there are some savings when your tax deductions increase in the following year.

When they do inform you of the amount, if it is going to be a struggle once the extra amount comes out of your pay, then contact them letting them know this, and ask for the underpayment to be collected over more than one year.

(It seems there are too many people on this board who seem to completely forget that not everyone is covered by Self Assessment, and then go on to scare people with incorrect assumptions and dire warnings of enquiries, investigations, fines and huge accountants bills. I would suggest that if you don't know about something you don't post about it.)

fallen121

Assuming the amount is more than £2.5K, what are my options? Can you have a combination of lump sum repayment and PAYE tax code adjustment?

Is it not possible to adjust PAYE tax codes mid year, because I am sure when they first awarded the tax relief they did it in December.

PS Nice to see a bit of healthy debate without all the usual bad feeling and name calling you get on other threads. This is very informative for me, I assure you, and I appreciate the time everyone is taking to post about this.

I have a Tessa only ISA which I can no longer pay into which is not offering a terribly good rate of interest. There's not much left in it as there's been a lot of 'rainy days' recently what with unexpected dental bills etc. so I am going to close it and put the money into a new ISA and maybe use that as the start of a 'war chest'.