Complexity Costs

The long running issue with regard to tax credits being overpaid by HMRC to low income families, and the financial problems caused by demands for repayment are well documented and well known.

However, another group of people are now also being hit by HMRC errors. This time it is pensioners who are on the receiving ends of demands from HMRC for payments of underpaid tax, resulting from errors by HMRC.

This Is Money reports that almost half a million people with small pensions have had slipped under HMRC's radar, as a result of this they are now facing demands for hundreds of pounds of unpaid tax.

Former nurse Olive Mader, 65, faces a bill of almost £7,000 after drawing her state pension for the past five years. She continued working full-time until she was 65, but was not taxed on her state pension. She says she cannot afford to pay.

HMRC is supposed to send out P161 forms to people approaching state pension age. However, Paddy Millard from TaxHelp for Older People says these forms can be lost in the post or left on the mantelpiece because older people don't understand their importance.

The errors stem from a breakdown in communications between the Department for Work and Pensions and HMRC.

Failure to comply with the bureaucracy means that HMRC fails to apply the right tax code, and pensioners don't pay the full amount of tax.

In an perfect world, of course we should all check that the tax that we pay is correct. However, this is not a perfect world:

-People do not understand the complexity of the tax system

-Not every elderly retired person is as good with bureaucracy as those who are still working

Whilst the underpayments do need to be addressed, there is a funadamental problem with how HMRC "connects/communicates" with real people and with other government departments.

This is yet another example of how the complexity of the tax system is causing distress, errors and extra work/costs in trying to sort out the mess.

A spokesman for HMRC is quoted:

"We issue a form called a P161 to every pensioner for whom we receive notification from DWP that payment of state pension is about to start.

We are working with the DWP to explore ways of making the service to people approaching retirement more joined up."

Let us hope that they really do find and implement a "joined up" approach pdq.

It is a pity that Brown doesn't do "simple".

Tax does have to be taxing.

The New Statesman, Britain's leading political magazine is delighted to announce that HMRC Is Shite has been nominated for a New Media Award in the category of Campaign For Change. The campaign for change award will go to the individual or organisation that has most effectively influenced opinions and behaviour through the use of new media technology. The winner of this award will champion a cause and provide information and tools to instigate change.

The full press release can be downloaded here.

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