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ESC A19 - is it worth seeking a review of my rejected appeal?

ESC A19 - is it worth seeking a review of my...

Since getting early retirement in 2005 I have received a pension from UKAEA (and their successor organisations). Whilst working I had also contributed to a superannuation 'additional voluntary contribution' fund from which I started to receive an annuity in 2008 from the Prudential*.

On 7 Nov HMRC notified me that I had personal allowances on both incomes and I owed them £5004. I appealed under ESC A19 as they knew about both incomes. I received their rejection on 24 November as they hadn't received information and 'end of year pay and tax details sent by your employer is not classified as information for the purposes of ESC A19'

I appealed against this decision based on a letter from Prudential dated April 2009 referring to a change in tax coding which confirmed that HMRC knew about the annuity.

HMRC have just rejected this appeal as the law allows them 4 years to investigate P14 / P60 information and they received no other source of information.

Prudential have confirmed they have no record of sending a P46 but they had sent the P14 each year.

Since 2005 HMRC told me I no longer need to send them a return and I didn't inform them about the annuity by any other means.

Have I any basis for further appeal with a likelihood of success (bearing in mind delays have the potential to result in penalties and interest charges)?

* Under an agreement with HMRC whereby the annuity can be taken over the period between early retirement and reaching State Pension age.

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By mhtax
07th Jan 2013 13:05

Appeal again

I seem to have read somewhere that the grounds for rejection have only applied sine mid 2010.

Did they send you any enquiries about your status along the way?

I can't remember any legislation which allows 4 years to investigate P14/P60 information - can anyone else enlighten us?

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By pepys
07th Jan 2013 17:16

Re Appeal again

Thanks for the response mhtax.

 

No they sent no enquiries.

 

The full quote regarding the 4 years (if it helps) is:

"We do not treat a P14 as relevant information for the purposes of Extra Statutory Concession A19 (ESC A19) because the information contained in in the P14 relates to a tax year that has already ended and for which the tax code can no longer be adjusted.  Under tax law we have four years in which to review the information contained on a form P14 and calculate the tax due for the year to which it relates"

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07th Jan 2013 13:20

It seems the Pru

must be culpable in someway too.....did they just set you off on a normal personal allowance?!  (did they not ask you about your other income before the first payment was made?)

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By pepys
07th Jan 2013 17:40

Re: It seems the Pru

Thanks for the response justsotax

Your query inspired me to have a further look through my archive and I found a letter Prudential sent me in 2008 "in advance of payment being made to your account".  They stated "HMRC has changed the PAYE tax code used for your payments".  I had assumed that as this was a UKAEA (United Kingdom Atomic Energy Authority) money purchase AVC (additional voluntary contribution) arrangement it was additional to my existing UKAEA pension and therefore considered as part of it by all concerned.

If fault lies with the Pru as you suggest is a possibility is there any way of getting redress from them?

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07th Jan 2013 14:14

No record of a P46 doesn't = No P46

I would expect the Pru to have pretty good processes, and there is no reason why they wouldn't have sent a P46 in the normal course of events, is there? Plenty of employers wouldn't necessarily keep any records of automatically filing a routine document.

Has HMRC explained what led them to change your tax code in 2009, if it wasn't your change in circumstances? Presumably it *was* your change in circumstances so they had been informed or they couldn't have sent that letter.

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By pepys
07th Jan 2013 17:38

Re No record of a P46 doesn't = No P46

Thanks for the response Tom.

An interesting point ~ their claim of having 4 years in which to review information seems spurious if there is evidence that they've actually used information regardless of where it's come from.

All the responses have inspired me to have another go.  Their self-serving definition of 'information' begins to sound like the sort of argument they would condemn if used for tax avoidance purposes.

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08th Jan 2013 11:37

Article

I recall a very good article by Keith Gordon in Taxation (subscription required) a while back on this where through FOI requests and use of historic internet caches he established that P14s were accepted as "evidence" by HMRC from 1971 to 2010 when they changed the policy to be in line with what they want ESC A19 to be, rather than what it is, in line with what mhtax said.

Definitely worth another go.

As for the 4 year limit - that is what the rules changed to recently:

http://www.hmrc.gov.uk/about/deadlines-taxpayers.htm

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08th Jan 2013 11:49

Ask HMRC to seek payment from the pension payer.

There is nothing within the wording of ESC A19 that precludes forms P14 or their electronic equivalent from being information for the purposes of that concession despite what HMRC say. See Keith Gordon’s article in Taxation 24/10/12:

http://www.taxation.co.uk/taxation/Articles/2012/10/24/48811/escapology

(This link may not work if you are not a Taxation subscriber)

However, HMRC’s response to this was reported in Tax Journal:

http://www.taxjournal.com/tj/articles/don%E2%80%99t-change-tax-arrears-concession-experts-tell-hmrc-05092012

If relief is not granted under A19, then perhaps succour may come in the shape of Regulation 72 of the PAYE Regulations 2003.  This law makes employers and pension payers responsible for PAYE under deducted from pay and pensions when such under deduction is due to their failure to operate PAYE properly. On the facts stated it seems that Prudential have failed to operate PAYE correctly in that they failed to submit a form P46 (Pen) to HMRC. If the Pru do not, as stated, have evidence that they submitted they will be unable to defend an HMRC determination. As the burden of proof in tax matters lies with the taxpayer, I think that Tom McClelland is precisely wrong. No record of a form P46 = no P46.

See also Graham Sherburn in the December 2012 issue of Tax Adviser:

http://www.tax.org.uk/Resources/CIOT/Documents/2012/12/ESC_A19.pdf

Ask HMRC to demand payment from Prudential as well as asking them reconsider refusal of relief under A19.

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By pepys
08th Jan 2013 13:00

Re: Ask HMRC to seek payment from the pension payer.

Duncan many thanks for this comprehensive reply.

Since my initial post and prompted by one of the replies I dug into archives and found a letter from the Pru notifying me that HMRC had changed my tax coding.  This was within the first tax year I received my annuity and therefore must have been based on information outwith a P14.  I have written to HMRC asking them to accept this as evidence they had information at the outset and therefore to accept my A19 claim or if not to let me know what was the basis for the change in tax code.

I've also written to the Pru asking them to recheck their records as they must have informed HMRC in some way to result in the tax code change.

If this does not succeed then your splendid advice offers me another line to try.

Meanwhile is there anything I can do to stop the onset of interest charges assuming this doesn't get resolved before 15 Feb?

 

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By pepys
08th Jan 2013 12:48

Re Article

Thanks for the response and the link mbdx7ja2.

Do you consider that as P14s were acceptable up to 2010 this gives me a fall-back position: If all else fails I would only need to repay underpayments since 2010, or is the guidance retrospective?

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08th Jan 2013 12:57

Is there any doubt

... that your tax-free allowance has been duplicated in each year and hence, that you have underpaid tax by £5,004?

ESC A19 is a concession by the Revenue and hence, they get to specify the terms on which they will grant their concession.  They choose to specify that the annual submission of a form P14 is not deemed to be valid information - hence, the rejection of your original appeal.

Duncan has argued that the Pru should have submitted a form P46(Pen), which is deemed to be valid information, and/or that the Revenue should have acted on the form they did submit.  That may give you grounds for a second appeal.

However, one of the other conditions of ESC A19 is that you needed to have a reasonable belief that you had paid the correct tax.  Did you not realise that you were underpaying tax when you received the forms P60 from each pension and saw the PAYE code for a full personal allowance on both forms?

If you succeed with a second appeal, you will have the satisfaction of knowing that you have avoided paying £5,004 of tax which you owe.

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By pepys
08th Jan 2013 13:19

Re: Is there any doubt

Thanks for your reply and challenge Euan

It honestly did not occur to me that I was underpaying.  The product I was buying when in work was an 'Additional Voluntary Contribution' and I had always thought of it as additional but part of my superannuation.  I knew that HMRC knew about both because I was getting tax coding information. I was in receipt of a UKAEA pension and the annuity scheme was termed 'UKAEA Money Purchase AVC Arrangement' and I assumed that these had integrated arrangements.  My tax knowledge does not extend to recognising tax codes and understanding that they signify a full personal allowance. I have only ever worked in a PAYE environment and it did not occur to me that HMRC would not manage correctly such a straightforward tax situation.  When I first received notification from HMRC I was shocked.  Doubtless I was naive but never dishonest.

I understand your point about avoiding tax I owe yet in common with many others I live within my means.  If unbeknownst those means are greater than they should have been the money nevertheless gets spent.  It's much easier to accommodate a reduction on a monthly basis when it's due than after several years when the money is already spent.

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08th Jan 2013 13:27

Interest and the Pru

Just to add a couple of points to the discussion above:

at this stage the money they want is "voluntary" - only when they issue you with SA returns does it become a legally enforceable debt on which interest runs. If you are looking at 2008/9 I would expect return to have been issued already - maybe it has?I "won" an ESC A19 case involving the Pru possibly in part because I could show the client did not get any kind of payslip or notification - literally just a cheque - so had no way of telling how the amount was made up or what code they were using. If you are in the same position might be a point worth making.

and generally I would add that passing the reasonable belief test is very tough so start marshalling your arguments here too.

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By pepys
08th Jan 2013 15:00

re:interest and the pru

Thanks Anthony

So far HMRC haven't differentiated between 08/09 and later years as the underpayment calculations came as a package.

Pru did send a payslip but as tax was taken and I had code notifications I assumed all was in order.

Thanks for the heads-up about reasonable belief arguments.  So far HMRC haven't asked about this presumably in the belief that their information argument was adequate.

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14th Jan 2013 12:24

Revenue can blame Pru

If the Revenue believe that it is the Pru's fault that you did not have the right amount of tax deducted from your income, they can demand the tax from them.  We are a payroll bureau and if we use the wrong PAYE code for an employee and they underpay their tax, the Revenue can come after us for the underpayment, as it was our fault, not the employees.

 

 

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By pepys
14th Jan 2013 12:52

Revenue can blame Pru

Thanks Sharon for your reply.

As far as I can make out the Pru used the codes that HMRC told them to.

The HMRC claim that I owe them this tax because no-one told them about my annuity.  However the Pru sent me a letter telling me the tax code was to be changed as instructed by HMRC (and this was in the first tax year of my annuity so not in response to an end-of-year tax return).  It appears to me that HMRC must have known or they couldn't issue a tax coding.  Also the Pru must have told HMRC or they couldn't have known to issue a tax coding.  I've asked both of them to investigate as some information must have changed hands.

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14th Jan 2013 20:03

Exact Same situation with NHS Consultant

Used the ESC A19 route, Changed hospital but both used same payroll department. P45 not sent but pasted around the office. New record set up prior to old one record being finalised. So new record had BR code operated by payroll on new employment. Underpayment due to earnings at 40% on most of the income. Revenue assessment raised after 12 month period as stated in ESC, so ESC A19 was the route to go.

Rejected, no reason given? second appeal. explaining how the error occurred. Had a very pleasent call from HMRC explaining that the 1st error was a PAYE reg 72, so ESC A19 was not applicable at this stage. They would take verbal instructions to pursue tax underpayment against Employer. (Note: the employer can refuse she said) if that happened then it would become an ESC A19 claim if applicable.

My reply was in this case it would be a waste of time as the employer was the government and as HMRC was the government agents for collection, then at the end of the day my client would not have to repay nearly £8k.

Was told that all avenues have to be pursued prior to ESC A19.

So make the PAYE reg 72 claim first then if that fails ESC A19 you should win but it is so time consuming.

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By pepys
16th Jan 2013 20:18

Exact Same Situation with NHS Consultant

Hi David,

Thanks for the taking the time to respond and for the interesting case study.  It's a little late for me to do Reg 72 first as I've already appealed under ESC A19 and have just submitted my second submission for a review of their rejection (based on further evidence).

The Regulations relate to an Employer.  Would that be the same as in this case it is a provider of an annuity?  There was no P45 involved as I was already in receipt of a pension (from a different provider) then this annuity started a couple of years later.

If the A19 door remains shut I will investigate if the Prudential have any liability. as you suggest

 

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15th Jan 2013 13:58

Just keep asking HMRC and threaten legal proceedings

It is really quite disgraceful that HMRC are persisting in chasing individuals for back tax, contrary to their own stated policy as set out in ESC A19.

The reason why officers can do this so shamelessly is that they have been told by their bosses that HMRC cannot be expected to consider an individual employee's P14 (and therefore P14s do not constitute relevant information for the purposes of ESC A19) .  (This of course leads to the question as to why employers are obliged to go through the P14 process each year when preparing P35s, but let's not let logic get in the way of the argument.)

The status of the P14s is therefore at the heart of the current dispute between HMRC and many thousands (possibly nearer 1 million in total) taxpayers regarding back tax and the application of ESC A19.

In my recent article in Taxation, I challenged HMRC to explain when P14s ceased to be relevant information for the purposes of ESC A19.  They claimed that it had always been the case (except that it was only "implicit" in their internal guidance until April 2010).  The difficulty with HMRC's argument was that they also produced a copy of the original guidance on ESC A19, prepared in 1971 and it was quite clear that that guidance if anything made it clear that P14s were relevant.  Indeed, generations of Revenue officers have annually reviewed employees' pay using the P14 - that being the purpose of the form - and the process is now being undertaken by the new HMRC computer system, again using the P14 information.

Some tax officers (or perhaps it is just one) have accepted that P14s are relevant.  Other tax officers are conceding the case when it looks as if the taxpayer will take things further.  In short, do not give up.  If, on the fifth attempt, you still do not get anywhere I would call in the cavalry.  If you (or any other reader) knows a solicitor who will act on a no-win no-fee basis, I would be prepared to act on a similar basis and take this matter to judicial review.  It is about time the judges got to see how one of the biggest abuses in the tax system at the moment is being perpetrated by HMRC.

Good luck.

Keith Gordon, Atlas Chambers

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By pepys
15th Jan 2013 18:38

Re: Just keep asking HMRC and threaten legal proceedings

Wow, if ever I might have thought of rolling over, there's advice to put fire in my belly.

This could be an exciting adventure if it gets that far.

I'll keep the site posted with HMRC response to my latest challenge.

Many thanks Keith and who knows what may come of this offer?

Regards

Peter

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21st Jan 2013 07:51

There goes reasonable belief!!

http://www.hmrc.gov.uk/guidance/p2flyer.pdf 

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By pepys
21st Jan 2013 09:07

There Goes Reasonable belief

Hi Marion

Thanks for the reply.  It is however too enigmatic for me.  I've read and re-read the pdf and have so far failed to detect the point you're making.  Please spell it out for me.

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21st Jan 2013 10:47

Proceedures

Thinking out of the box always helps? Private pensions from providers either occur, while in employment (early pension taken or due to ill health) or when you retire. There has to be an asumption that you are receiving a second income and you will have received a questionaire requesting certain details, these are passed on to HMRC, who then instructs them to operate a tax code. Pre self assessment it was possible to have 2 personal allowances as full records were not matched. This should not happen post SA upto the last new system upgrade.

HMRC has therefore received information from both providers, so giving 2 PA allowance proves they have the information but not acted upon it within the ESC A19 time limits (12 months) see full definition on website.

Downside is they may claim that you as a tax payer knew a mistake has happend as you have 2 personal allowances. If you have been in PAYE all your life, just claim you don't understand the coding notice?

Just keep fighting it!!

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By pepys
04th Feb 2013 14:40

Procedures

Apologies for the delay in replying David.

I have asked the Prudential (the provider of the annuity / additional pension to search for records of informing HMRD.  They have now re-re-confirmed that the only record they have is of sending the P14 each year..  Because of the various communiques I received from the Prudential regarding tax it didn't occur to me that I needed to inform HMRC (who incidentally while I was still employed told me I no longer needed to complete a SA return) so it is credible that the only information they received was the P14 each year.  I had thought that a change of tax coding notification from the Prudential in 2008 (on instruction of HMRC) was evidence that the Pru must have told HMRC.  However the Pru has just told me they were acting on a generic tax code change instruction following the latest Budget implementation.

Regarding what I should have perhaps known from the return I certainly didn't know that I was wrongly getting two allowances.

 

Thanks for the encouragement.

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21st Jan 2013 13:23

Sorry Pepys

Wasn't meant as an answer for you but just spotted on website the flyer which will accompany the 2013/14 codes on issue. There are so many warnings et in it I think you would be hard pressed to claim ignorance for 2013/14 onwards unless you deny receipt of the code number

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By pepys
04th Feb 2013 14:41

Sorry Pepys

Thanks for the clarification Marion

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04th Feb 2013 12:29

ESC A19 & Self-assessment

I have a case which has been dragging on since June last year re underpayment arising in 2008-09 & 2009-10 as a result of HMRC not using information disclosed on a P46 Car form submitted on time (In Dec 2008) by employer notifying a change of car to HMRC.. For the next three years they made a right mess of the tax codes and continued right up to 2011-12.

 

They have issuded P800T for earlier years and requested SA returns for 2010-11 & 2011-12. Client not represented at the time. Dealtw with TR 11 & 12 himself. They lost them!! He had to resend them 3 times before they processed them in July 2012. He found that he had underpaid tax in 2011 and overpaid tax in 2012. He asked for 2012 refund to be set off against 2011 and paid the balance in July 2012.They set off the refund but treated this as done on 31 January 2013????? and  charged him late payments penalties/surcharges and interest as they said he had not paid within  due dates??? We got involved and got those cancelled. The cheeky devils.They'll try anything...

 

To get back to ESC A19 application for earlier years this has been rejected twice, a review application has been rejected twice and a complaint has been rejected twice. But never mind we are now going to the adjudicator... We/I am not giving up.. Especially when HMRC agreed they messed up..

Their argument to refuse ESC A19 are :

"Mr xxxx could not possibly have believed that his tax records were correct because the tax that he owes was large enough for him to notice”. Our reply :  Until the underpayment has been quantified (which was three years after end of 2008-09) how was taxpayer to know whether there was an underpayment and whether it was large enough to be noticeable??? Plus ESC A 19 does not specify an upper limit after which he does not apply.

The code issued was 233L and your client would have a tax refund when this tax code would have been operated.”   There could have been a number of reason a refund could be due, following the change of car. ...

Their arguments continue along the same line.. with more implied comments such as we know we messed up but we are still going to blame the taxpayer for our mistakes... and we are the government so we can do what we want.."

Lets hope the adjudicator is a fair and just person..

 

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By pepys
04th Feb 2013 14:52

ESC A19 and self assessment

Thanks for the information M Shapland.  I'm not sure that gives me encouragement as HMRC seem prepared to battle from a much weaker position as in your case than mine.  I suspect personal bonuses may depend on the number of A19s they successfully reject. Anyway inspired by the continued support from so many people I just searched my archives and found a letter from HMRC in March 2010 which refers to working out my tax code for 'your other employment(s) or pension(s)'.  This seems to be definitive evidence that they were aware of both pensions (or they had used the information in the P14 so they can't keep claiming it's not information).

So another letter will shortly be winging it's way to them.  Thanks for taking the trouble to post, much appreciated and good luck with your adjudicator.

 

 

 

 

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04th Feb 2013 15:35

ESC A 19 & Self Assessment

Just don't give up. It has always astonished me that HMRC can claim that P14 are not information when they use the information on P14 toraise the P800T in the first place....

Good luck

 

 

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By pepys
05th Feb 2013 16:55

ESC A19 & Self Assessment

Thanks for the encouragement, I'm still battling on at the moment.

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By pepys
22nd Feb 2013 15:04

Update: Did they or didn't they issue a tax coding notice?

I had said I would report progress after all the trouble taken by the many helpful advisers on this site and I think you might find it interesting as an insight into the efficiency and accuracy of HMRC.

 

I had found a tax coding notice from March 2010 referring to both pensions. I had high hopes that this would be the end of the HMRC defence of their position that they did not know about the two pensions. However they told me by phone that they had issued the tax coding notice to the Prudential and the Prudential had failed to implement it (ie HMRC changed their position from 'we didn't know' to 'we knew but we acted appropriately'). So I wrote to the Prudential telling them they should recompense me for this failure. The Prudential replied denying they received a notice. In a separate letter from HMRC again refusing my ESC A19 claim they state that they issued no coding notice.

 

I have just written to HMRC again asking them to resolve this anomaly wherein I've been told both by them that they've issued a coding notice and that they haven't. The coding notice (which was sent to me) states that the Prudential have been instructed to change the code.

 

So as I write the score is 1 tax coding notice and 1 phone call both from HMRC confirming the notice was issued to the Prudential against 1 letter from HMRC and 1 letter from the Prudential stating it wasn't; a 2-2 draw but now going into extra time.

 

I await HMRC response with interest.

 

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22nd Feb 2013 15:25

and the answer will be

if you had the coding notice why were you not making sure Pru were using it.

But do keep trying nonetheless! And keep us posted.

 

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By pepys
22nd Feb 2013 15:48

and the answer will be

Thanks for the response and challenge Anthony.  It is only since the problem came to light that I have been reading these documents in detail.  Hitherto my reading went no further than to note that no action was required of me.  After a lifetime of PAYE it never occurred to me that there might be a problem and I should become a progress chaser for HMRC.

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23rd Feb 2013 11:37

Revenue known

It's now a no win situation for the Revenue now.

They have stated they knew about the 2 providers.

Look at the A19 rules, (print off from HMRC site) if in receipt of information and not acted upon within 12 months than A19 kicks in. No ifs or buts. Put a copy in your letter highlighted where necessary, copy of the revenue letter stating they knew

Ask for review or next tribunal, insist, point out what prats they will look if it goes there.

Surprise, surprise YOU WILL GET IT IN YOUR FAVOUR guarented believe me

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By pepys
24th Feb 2013 09:55

Revenue known

Hi David,

Thanks for the reply.  I expected it was the case as you argue but when I rang HMRC they acknowledged that they knew in 2010 but that they did take appropriate action by issuing a coding notice to the Pru which the Pru then failed to implement.  At the moment I don't know if this is the case or not as I have a letter both from them and the Pru saying no tax coding notice was issued.  Having told me both that it was and that it wasn't I look forward to their reply.

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By pepys
27th Jul 2013 18:40

ESC A19 - is it worth seeking a review of my rejected appeal?

I posted this question on 7 Jan (2013) together with a summary of the background.  I received a large number of posts offering advice, encouragement, experience from other cases and challenge.  All of these I found very helpful and encouraging and am very grateful to all of you who took the trouble.

After various responses from me and then very lengthy waits for further rejections by HMRC I invoked the complaints procedure and they have now come back and agreed to waive this historic tax and to give me a small amount of compensation for expenses, delays and anxiety.

Their case was quite weak as they had sent me a letter referring to both pensions and telling me they had instructed the annuity provider (Prudential) to tax me at 20%.  In fact they hadn't instructed Prudential.  So they knew about both my incomes and had failed to make proper and timely use of that information (the terminology and basis for a claim in the Extra Statutory Concession).

So my reason for this post is to let you know that my journey has been successful and I felt you might like to know and also again to thank all of you who helped me on that journey.

Good Luck with your journeys and may they all work out as well.

 

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