HMRC Is Shite

HMRC Is Shite
Dedicated to the taxpayers of Britain, and the employees of Her Majesty's Revenue and Customs (HMRC), who have to endure the monumental shambles that is HMRC.

Wednesday, 12 January 2011

HMRC's "Secret" Write Off

The Telegraph reports that up to 250,000 pensioner who, because of errors on their tax codes, have unwittingly underpaid tax will have their underpaid tax debt written off.

For why?

Seemingly they would have an excellent claim against any demand sent out by HMRC, because the tax on their pensions should have automatically been deducted at the correct level, and there was no way for individuals to check for mistakes.

Interestingly the individual write offs will be made in "secret", ie the affected pensioners won't know anyhting about it, as the tax demands have not actually yet been sent out.

The intriguing question that has not yet been answered is, if those who underpaid had no way of knowing that their tax affairs were in error, what about those who have overpaid?

Tax does have to be taxing.

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  1. "The intriguing question that has not yet been answered is, if those who underpaid had no way of knowing that their tax affairs were in error, what about those who have overpaid?"

    Then they will be sent a repayment. No news here. As with everything that has been reported around these underpayments/overpayments this is how it has always worked and reputable accountants know it.

    If the amount owed is small or there is no way the individual could have reasonably known there was an error the underpayment isn't issued but repayments always are. If they issued an assessment for every underpayment then almost everyone under PAYE would have to receive one 1)the tax tables always round things down in the taxpayers favour 2) the tax code also rounds up to give people an extra amount tax free compared to the actual allowance due.

    If the underpayment is issued (because it is too large AND it is believed the individual should have known about it) the individual can still use ESC 19 to appeal the underpayment and based on the information provided the underpayment may be written off.

    I have to wonder how you made any money if this is news to you.

  2. "They will be sent a repayment"

    How long will they have to wait though?

    Will they still be alive to receive that payment?

    The majority of the population (both pensioners and workers) are not accountants, people do not understand the tax system and are frightened of dealing with HMRC.

  3. They are working through assessments. If they find an underpayment it is written off or sent out. If they find an overpayment it is sent out. They don't deal with all the underpayments first (that isn't possible).

    So some people will have already have received them and others will as they come up. But I guess the Telegraph wouldn't find it worth reporting "Quarter of a million continue to receive refunds just like every other year!"

    And I wasn't responding to the majority of the population. I was responding to you and the "intriguing question" you raised. As a reputable accountant you know how the tax system works, that assessments are done at the end of the year and that they don't send out every small underpayment.

  4. Repayments have been delayed in the past:

  5. A huge number of U/P are pension provider error they very rarely send PENNOT forms to HMRC and so a record is not set up and codes are selected and used by the providers without any HMRC involvement. P14s are submitted at the end of year but cannot (until the new system) be reviewed and added as live pensions as it was all dealt with manually.
    HMRC takes flak for its mistakes (quite correctly) but also is blamed for the errors of pension providers and employers who do not follow the rules and lay blame on HMRC.

  6. Yes Ken but what the Telegraph didn't report is that from the same series of assessments that highlighted the underpaid pensioners over £1billion has been repaid. With only 10% of cases still to be looked at and requiring information from the individuals affected any further refunds will take as long as it takes to obtain that information.