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

Posted: October 21, 2011 in Uncategorized

By Sam Thewlis

pensiner 300x225 HMRC cock up takes money off pensioners (while the Chief lets Goldman Sachs off £10m)Are 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.

http://www.bitterwallet.com/hmrc-cock-up-takes-money-off-pensioners-while-the-chief-lets-goldman-sachs-off-10m/50336

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s