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.

Monday, 31 July 2017

HMRC Pays Back £27M of Overtaxed Pension Withdrawals

More than 10,000 counts of tax overpayment relating to pension freedoms have led to a £27m bill for HMRC.

From 1 April to 30 June 2017 HMRC processed:
  • P55 = 6,070 forms
  • P53Z = 3,408 forms
  • P50Z = 1,098 forms
Total value repaid: £26,835,357.

The significant overpayment is due to savers being given emergency tax codes when using the flexibilities for the first time, with HMRC assuming that the same amount will be withdrawn monthly.

Royal London director of policy Sir Steve Webb is quoted by Professional Pensions:

"It is outrageous that in just three months HMRC has over-taxed people by more than £26m.

It cannot be acceptable to take thousands of pounds per person in excess taxes and then expect people to have to claim that money back.  

The rules need to be changed so that only basic rate tax is deducted and any extra tax due is collected through the normal tax return process. This would be a far fairer system."
 An HMRC spokesperson doesn't see the problem: 
"Claimants presenting their 2017/18 P45 to their pension provider will pay the correct tax. In the event that they don't, any discrepancy will be settled within 30 days of HMRC being notified."
All very well and dandy IF:

1 The taxpayer knows that he/she has been over taxed

2 The taxpayer knows what form to fill in, and

3 HMRC really do pay the money back within 30 days.

The reality is that the above conditions are not always being met!

By way of example, AJ Bell in April noted that last year only 11,000 claims per quarter were made, despite 139,000 pots being accessed over the time, potentially meaning thousands of users may have failed to reclaim the overpaid tax.

Tom McPhail, head of policy at Hargreaves Lansdown, nailed it and said the government has designed its tax system for pension withdrawals around what works best for its tax inspectors rather than putting the consumer first.

He said the result of this is a system which causes confusion for pension investors, cash-flow problems and the risk they end up paying too much tax.
You wouldn’t let a private company get away with this so why is it OK for HMRC?”
Well said!

Fiona Tait, technical director of Intelligent Pensions, said the figures demonstrate the unsuitability of using the emergency tax rules for payments made under pension freedoms.
When pension funds are withdrawn as an income the emergency tax rules do not have much impact however the idea that the proceeds of an entire pension fund are treated as if they will be paid each month is ridiculous and it should not be beyond the wit of HMRC to devise a way for consumers to indicate up front whether a pension payment is an income or one-off lump sum. 

HMRC’s own quarterly statistics, released this week, show that the number of withdrawals made under pension freedoms is increasing while the value of individual payments is decreasing. This means that increasing numbers of consumers are likely to face having to reclaim their income tax for cashing in relatively small pension amounts.
I guarantee that HMRC will not lift a finger, as this gives them quite a cashflow advantage.

Tax does have to be taxing.

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  1. two basic observations which apply to most hmrc cock ups:-

    1. the total lack of any accountability, and

    2. the resultant persistent casual incompetence.

    and not only are incompetent, they enable casual misconduct, and are utter bastards who derive great pleasure out of others suffering = cowardly feeble little bullies

  2. Indeed, it is an important lesson for all taxpayers, and current staff / potential future staff, and with apologies for the strident language, but HMRC are, in the main, a bunch of evil bastards lacking in common decency and any morals (don't ever be fooled by their pretend charm).

  3. Any bright sparks out there with a way of taxing these pensions more accurately?

  4. I disagree that it's designed around what's best for its tax inspectors, 10000 forms to deal with?
    As for the cashflow benefit, surely that's the treasury's?

  5. I worked for HMRC for 25 years. My last role was processing tax refunds, especially in the CIS scheme. It was a case of firstly "If they ask then tell them they are not due a refund. If they insist then tell them that we will look into the matter. 4 months down the line and after many phone calls and letters from the tax payer they MIGHT just get a refund. HMRC plauses itself in respect of valuing their staff just to get the IIP acreditation. But in reality it is a truly awful place to work. Hardworking and knowledgeable caseworkers are passed over for promotion in favor of those that say the right things and tick the right boxes. "lean" and "Pacesetter" was adopted by HMRC. The factory production line ethos pioneered by Toyota. When I diplomatically pointed out that Toyota has had to recall a lot of its cars due to brakes/throttle issues I was met with a stunned silence and my card was marked from then on. I left and it was the best thing I have ever done. Shit organisation run by absolute muppets. Lyn Homer was an abject disaster at the UK Border Agency so then she was promoted to CEO of HMRC. You could not make it up.
    I wish that she had married John Simpson because then she would be Dame Lyn Homer Simpson. DOH!!! What a total waste of space

    1. Another nasty little bully...there's many on the HMRC senior management gravy train.