I have received a request (from a new client) to review HMRC assesments for 2008/09 to 2010/11 which show a total liability of over £7,000. These were issued in October & November 2012. They have also sent tax returns for completion for the 4 years to April 5th 2012
I claimed relief under ESCA19 which has been refused because HMRC state "we have no record of any information sent by your client or a third party which we failed to act on. If your client thinks that we have overlooked information that has been sent to us please let us know
1 What information was provided
2 When it was sent to us
3 Who sent it" .
The letter continues that receipt of end of year pay and tax details sent to us by their employer is not classed as information for the purposes of ESC A19.
I have then referred to the HMRC manual under reference PAYE95005 to PAYE95095 .
PAYE95055 provides details of the type of documents that an employer may submit and would be acceptable for considering relief under ESC A19 and confirms (under "Other Information") that the receipt of forms P35 or P14 are not included.
My client continued working after he commenced drawing his occupational pension in June 2008. The employing company used a large pension outsourcing company to administer the pension. They used a code of 522L in June 2008 (appears to be the personal allowance for a code for 2007/08) and this was increased to 582L in September 2008. (no idea why!!)
As the outsourcing company was replaced by a different outsourcing company in April 2012 I have not yet been able to find out the reason for the above 2 code numbers or whether a P46 (PEN) was submitted to HMRC.
Full personal allowances continued to be given against the employment income.
My client therefore received 2 sets of personal allowance and the combination of his employed and occupational pension income results in 40% tax being due on a proportion of the total income.
HMRC state that in their decision letter "We only became aware that this additional pension income had started when the P14 was submitted at the end of the year".
HMRC then issued coding notices in March 2010 being a BR code for the Pension and amended the employment code of 47L to include an "adjustment to basic rate". This should recover the estimated higher rate tax.
The P14 for 2008/09 would have been received in April 2009 so it took about 10 months for HMRC to issue new codes and then not for 2009/10 but to start in April 2010.Just 20 days later they reissued the Pension BR code and eliminated the "adjustment to basic rate restriction" on the employment code and therefor no higher rate tax was collected in 2010/11
Finally the codes issued in February 2011 for 2011/12 were correct and the correct tax was therefore paid for 2011/12
My questions are
1 Under PAYE95011 it states that " If HMRC discover that the underpaid tax has occurred because of an employer error , and not because of HMRC failure to make proper & timely use of information,then the employer should be pursued for payment of tax.Assuming that the P46(PEN) was not submitted by the outsourcing company has anyone been successful in getting HMRC to eliminate the whole or part of the underpayment as far as the employee is concerned? If so has HMRC tried to tax the employee on the "benefit" of his employer paying the tax ?
2 I have no idea why HMRC changed the code for 2010/11 which resulted in a further underpayment. They must have had some information to initially issue a code BR on the pension & one to recover the higher rate tax on the employment code.Do you think there is a valid claim for elimination of the 2010/11 liability as HMRC amended the code incorrectly?
3 As self assessments have been issued will interest be charged by HMRC if the tax is not written off under ESC A19?
Very many thanks for any comments