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with HMRC assuming that the same amount will be withdrawn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funds are withdrawn as an income the emergency tax rules do not have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.
Professional Cover Against the Threat of Costly TAX and VAT Investigations
Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.
Ken Frost has negotiated a 10% discount on any polices that may suit your needs.
However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.
What is
Solar Tax Investigation Insurance?
Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.
To find out more, please use this link
Solar Tax Investigation Insurance
HMRC Is Shite (
www.hmrcisshite.com), also available via the domain
www.hmrconline.com, is brought to you by
www.kenfrost.com "
The Living Brand"
