HMRC cock up takes money off pensioners (while the Chief lets Goldman Sachs off £10m)

13 October 2011

pensionerAre you a pensioner? Quietly minding your own business, watching Gardener’s World, One Man and his Dog and Last of the Summer Wine on the telly? Have you just received an unpaid tax demand from HMRC for at least £1,000?

If so, you are one of the unlucky 146,000 pensioners whose tax code for 2010/11 was wrong. This meant that HMRC failed to collect the tax due on your state pension. And now they want that tax back. But don’t worry, they aren’t trying to scare old dears into a heart attack, they can pay it off over three years. Good job they aren’t on a fixed income or anything that would make that difficult. Oh, wait…

I thought a State Pension was tax free

It isn’t. If a state pension is your only income, the basic amount (£5,078 for 2010/11) falls within the personal allowance amount, so there is no tax due, which is why it is normally paid without deduction of tax (gross). If, however, you have modest other income, the state pension could lift your total income so that it does, in fact, become liable to tax, same as everyone else. If the other income is a private pension, HMRC normally collect the tax due on the State pension through PAYE, same as for employees, so that there is no underpayment of tax. Except when they forget.

But they did this last year didn't they? And some people got their tax written off?

Yes. HMRC seem to be burdened with enormous PEBKAC* computer problems and they did indeed screw up lots of people’s tax codes last year. Unfortunately the Extra Statutory Concession (ESC) that some people were able to shout about loudly enough does not apply to amounts due under 1 year ago. So it’s hard cheese (and possibly stale bread and water) for all those unlucky pensioners.

A spokesperson for HMRC told Which! “Where a pensioner has underpaid tax for 2010-11, we will automatically code out that underpayment over a period of three years from April 2012 without them needing to contact us,” which is big of them. But it’s OK because “We will also write to these customers to apologise, explain why the underpayment happened and how we will collect it”.

An example £1,000 underpayment (roughly £5,078 at 20%) coded out over three years will cost a pensioner a little under £28 a month, which is not a huge amount, but may make a huge difference to some. While mistakes can, and do, happen to the best of us, surely we should expect a better standard of service than making pensioners scrimp and sending ridiculous cheques for £511 to Bitterwallet writers who fortunately know better than to cash it. Damned if I am wasting 20 minutes on hold on my phone bill, or even the cost of an envelope and stamp informing them of their idiocy though.

And what's this about Goldman Sachs?

Goldman Sachs pulled a tax avoidance trick last year to avoid paying £30m of bankers bonus tax. The scheme didn't work, and they accepted they would have to cough up the unpaid tax but they were refusing to pay £10m of interest on unpaid tax. The head of HMRC Dave Hartnett had a coffee with the head of Goldman Sachs** and miraculously the £10m disappeared. Allegedly. Hartnett is now being quizzed by a Government Select Committee over the deal.

*Problem exists between keyboard and chair

** It may not have been coffee. It may have been a cocktail aboard a Caribbean yacht. I don't really know, but you get the idea.

10 comments

  • The B.
    My old man had been retired for 10 years when he died, HMRC went back through his records for the 10 years prior to his retirement when he was self certifying and discovered that he owed them a massive £500, how much did it cost them to look back through 10 years of tax returns? I'm guessing more than £500.
  • Dick
    The mistake shouldn't have been made in the first place. But if they now owe £1000 (20% of £5K), then surely their income is about £10K per year, so £800 a month. So £28 is 3.5% of that - not much (especially compared to this year's tax of £83 per month).
  • Balls
    Dick .. is your real name Cunt
  • Rod
    Or PICNIC Problem In Chair Not In Computer
  • oliverreed
    Too many big corps pay little to no tax, Barclays, Boots, whoever, take it to those cunts first.
  • Paul
    Or error ID: 10t
  • Craig W.
    If I make a cock-up, I don't expect other people to pay for it. So exactly what makes HMRC so different? Their time would far more profitably be spent chasing the wealthy tax-dodgers whose behaviour always goes unpunished.
  • Chode
    Well said Balls.
  • Bill L.
    Who says £28 a month is not a great deal? It is for me and, through conversation with other pensioners I know, it is for them too.
  • Brian R.
    Dont accept paying it back over 3 years ( this is not written in stone ) Just tell them you really cant afford to pay more than a £1 a month dont settle for anything less than £ 3 a month Then when you reach 80 simply stop paying ( they wont send an Octerganian to Goal

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