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HMRC argument!

I think I've posted about this topic previously, but now it's really winding me up!

Basically I have a client who, for several years, has received employment income and army pension income, both including his personal allowance - which is obviously incorrect.

HMRC have noticed this and wrote to him saying he owes nearly £5k for 07/08, 08/09, 09/10 & 10/11.

I appealed after some very helpful posts on here under ESC A19 (after all, it's not his fault!) but they have written back and rejected the appeal based on the fact that they weren't aware of his army pension income until the end-of-year returns were submitted.

I find this quite strange as he's been receiving this since 2000 so surely they would have known before the 07/08 year?

Any advice would be much appreciated as I'm in the process of appealing again - the only thing I don't want to do is open up a can of worms and have them realise he hasn't been taxed properly since 2000!

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28th Mar 2012 08:33

So what you're saying is that your client should be entitled to a double personal allowance, and shouldn't have to pay the correct amount of tax per the law and as everybody else does?

Don't get me wrong, I would have tried exactly the same route you have, but it's difficult to sympathise... maybe it's time to just pay the tax...

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28th Mar 2012 08:55

... er, no...

... I'm not saying that in the slightest, so if one of your clients received a bill for £5k caused by HMRC's mistakes you wouldn't try to defend it for them?

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Sympathy shouldn't come into this, in my view

To confirm; the client has always been employed? The Army pension started in 2000? If that is correct, HMRC has had almost 12 years to correct THEIR error! That's part of the reason why national insurance numbers are useful as a matching facility. Presumably, your client doesn't have two of those?

I would obtain your client's authority and then write to the army pension provider and ask them; when and how they notify HMRC about the annual value of the pension. If, as I suspect, the information is useful and, in your favour, you can then put this to HMRC and seek a further review.

You may find that, on reflection, HMRC climb down and accept they did have the necessary information.

One concern I have - how long have you acted in this case? When were you initially aware of the personal allowance duplication?

If you ultimately "win" the case, remember to charge additional costs, which you can then try to reclaim from HMRC.

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By blenk
28th Mar 2012 10:56

Is the army pension liable to tax?

Depending on the circumstances of your clients exit from the army, it may not be liable to tax at all

 

http://www.hmrc.gov.uk/manuals/eimanual/EIM74302.htm

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Justice - the best money can buy

Come on Thisitibi. 

It's nothing to do with the rights and wrongs of paying tax, it's about using whatever is available to you to provide the best job for your client.

If the individual did not know what was going on, or did not understand it, he will be reeling from a demand for about £5,000 (I assume £4,842); at sub £5.000 it is unlikley he was liable to higher rate in any year and he is already taking a knock from what he thought was his correct take home pay.

HMRC have tried to change the nature of ESC A19 it used to be headed "A19. Arrears of tax arising through official error" whereas it is now headed "A19 Giving up tax where there are Revenue delays in using information".  However, HMRC in it's owned half baked way has managed to leave the old definition on the contents page of its current booklet of the concessions.

The engagement letter probably reads about paying the right amount of tax, so initially your view may be right but read in conjunction with the concession the correct amount of tax could be almost £5,000 less.

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28th Mar 2012 15:32

... thank you for all your comments...

... though I do find thisistibi's baffling - let's hope a client doesn't come to him/her with the sort of problem I've been dealing with!

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28th Mar 2012 16:27

"Baffling"

jaybee661 wrote:

... though I do find thisistibi's baffling - let's hope a client doesn't come to him/her with the sort of problem I've been dealing with!

I suppose the beauty of this website is that you receive a full range of comments - that's a good thing.

I think it comes down to how you interpret "Could reasonably have believed that his or her tax affairs were in order".  The reason for my comment was that I'm struggling a bit seeing how your client thought their tax affairs were in order - for example, is this an existing client of yours?  If so, how come the error wasn't previously identified?  If not, presumably a coding notice was issued for the second pension, which the client made no reasonable effort to check?  That is the reason coding notices are issued, after all...

 

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28th Mar 2012 15:33

Military Pensions

My father started to receive a miltary Pension around 20 years ago, my husband just last month. In both cases what used to be Paymaster Generals office informed HMRC of the Pensions commencement (in just the same way that an Employer notifies HMRC of a new Employee - they do not advise them of the taxable amount) This should prompt the issue of a form to the individual (P161) The form asks for details of all expected income including non-pension income, and the start dates and amounts of pensions, so that HMRC can issue an appropriate PAYE code to the pensioner  for each source of income. The submission of this form is therefore what prompts HMRC to issue the correct PAYE notices during the tax year that the Pension commences i.e. long before the End of Year Returns are submitted. It's unlikely that your client will recall filling in such a form but he might - back in 2000 I think it would have been the old sqaure form which had white boxes on a light blue background. Assuming that he did fill it in with correct details of his expected Employment income and pension then HMRC have been notified and have failed to make use of that information. An earlier post also makes a good point re National Insurance numbers, it's possible that either his employer or the Paymaster made a mistake in his National Insurance number so HMRC might never have matched the two records. Have a look at both P60s for each year that you can to see if the National Insurance details do match .... As another poster has suggested also check to see if it's a tax free Pension (such as a special Medical Discharge pension, and also check to see if there was any change in 2007/08 in so far as entitlement for example did he turn 55 in that year?)

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I would be quite surprised if

you didn't come back on here, in a few weeks/months, to say that HMRC had "reflected" on the situation and decided to allow ESC A19 in the circumstances.

A word of caution though, you might have difficulty with the calculation for 2010/11 as it is less than 12 months since the end of that year.

I have a moral sense of justice for all my client's and always go the extra mile in these situations. If you believe in what you are trying to achieve, you usually succeed. You won't win every case but at least your moral compass is intact.

 

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Earlier I did ask the question........

One concern I have - how long have you acted in this case? When were you initially aware of the personal allowance duplication?

I would therefore reserve judgement until the OP replies to that enquiry.

However, I would also suggest that taxpayers would reasonably assume and, certainly could quite safely do so, way back in 2000, that HM Revenue & Customs, were able to administer the tax system correctly. It's the last few years where this type of issue has become apparent.

My hunch is that the OP has not acted in this case for very long and, if that scenario is correct then, the taxpayer could and should, reasonably expect that his tax affairs were in order.

You have to appreciate that most taxpayers assume that their affairs are in order and, quite frankly, the systems are too complicated for many taxpayers to think anything else. That is not the taxpayers fault in my opinion.

 

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28th Mar 2012 17:40

... sorry...

... I will answer the question - he is a brand new client, only called me when he received the letter from HMRC demanding £5k...

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By iknell
28th Mar 2012 21:39

I've had a number of similar cases

I agree with 'Time for change'.  Like you, new clients who come to me due to large tax bills.  I like many accountants use the ESC A19 and write ti HMRC to quash all claims for unpaid tax where the client wasn't notified within one year of the tax year end.  In all cases HMRC write back (usually months down the line) saying that ESC A19 wasn't applicable.  I then write back reiterating the legislation and then 3-4 months down the line HMRC reluctantly agree and withdraw the unpaid tax 'request'.

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By Monsoon
28th Mar 2012 22:29

Very similar case - tax written off

I've just (finally) had a very similar case (job + MOD pension from early 00's) win under A19, but I must have written about 6 letters, and was about to go to adjudicators.

It definitely sounds like it's one worth pursuing - good luck.

 

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29th Mar 2012 08:50

Interesting

Thanks for the above two posts, interesting experience and perhaps shows there are grounds to be more persistent than what I would have expected.

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Thisistibi -

you should become "like a dog with a rat"!

iknell and Monsoon portray what has become the norm.

I wouldn't be surprised if, internally, HMRC aren't encouraged by the Government to counter all initial arguments under ESC A19. If the taxpayer, or their agent, has any mettle and starts to properly investigate the situation, it is usual, in my experience for HMRC to back down.

What is more difficult, these days, from what I see, is getting HMRC to accept refund of additional costs to clients and, at the moment, I have a case with both; The Adjudicator's Office (unlikely to even be reviewed until June 2012!) and the client's MP.

Justice, fairness -don't make me laugh.

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29th Mar 2012 09:59

I have some sympathy with thisistibi's view...

I get a little tired when hearing the 'harry Redknapp' defense (I know nothing about tax....).....of course it is our job to do the best for our client and therefore you take all of the appropriate actions possible, and good luck, there is nothing like turning over the Revenue to put a smile on your face.  But if he had been on a BR code for both incomes do you think he would have noticed (because after all he knows nothing about tax....?!)...and just remember this tax that is written off is not suffered by the Revenue.....all of us other taxpayers suffer the burden.....so yep I would do exactly the same for a client if they came to me with these details, but there is another side to this.  And presumably he got a payslip for the relevant income each month....does this not contain details like the PAYE code, .....'not his fault'....well I am hoping he at least took some responsibility for not checking his payslips..... 

 

 

 

 

 

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29th Mar 2012 10:21

Should client pay in the meantime?

I'm dealing with a very similar case at the moment and have just had a rejection letter from HMRC whiich I am now appealing against.  Should I be instructing to client to pay the tax in the meantime, or wait?  The client is getting concerned about the interest accruing.

Thanks.

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29th Mar 2012 11:21

Yep

If my view wasn't correct, then consider the fact that if you receive an incorrect coding notice, if you interpret A19 as covering any and all such errors, then what taxpayers should all do is NOT notify HMRC of the error and ensure 12 months elapse before going back to HMRC saying "ha ha, too late, now write off the tax!"... and "oh yes I didn't know it was suppose to be any different".

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By Monsoon
29th Mar 2012 11:26

"But I don't understand coding notices"

Slight tangent here.

I think it's easy for us in the profession to assume that ALL people can at the very least understand coding notices and personal allowances etc.

It really is all Greek to a lot of people. Not all people could have reasonably understood if they were having extra or not enough deducted. A lot of people receive coding notices and their eyes glaze over. Some people are semi-illiterate, some people are dyslexic, some people yes, they don't care but could understand it, but a lot of people get really baffled by it.

Just saying. :)

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Nice thought Thisistibi
Reasonable belief that your tax affairs were in order

HMRC will consider the facts and circumstances of any claim that this concession should apply and decide whether it was reasonable for you to believe (prior to receiving the Tax Calculation) that your tax affairs were in order.

So what you're saying is that "YOU" receive the notice of coding (presumably your client asks you to check it)? You defeat that argument, immediately, with the above clause from ESC A19 -don't you? It would of course be unreasonable (as an accountant/tax adviser) to believe that your client's tax affairs were in order.

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29th Mar 2012 11:51

@Time for a change

Actually I was thinking of situations where the taxpayer doesn't have an accountant.  I am saying that unrepresented taxpayers should ignore errors in their favour generated by HMRC and intentionally wait 12 months, and claim that they fully believed that their tax affairs were in order (which is obviously a porky).  There is absolutely no way HMRC could confirm the taxpayer's state of mind at the time they received the incorrect coding notice.

Clearly, where a taxpayer is represented, it would be much harder to do this - but that's not my point.  I was just demonstrating why the concession cannot be a blanket approach covering all HMRC errors - it fundamentally wouldn't work and I believe it was not intended to work that way.

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29th Mar 2012 12:11

@monsoon....as I earlier suggested

I have no doubt had the taxpayer in question would have queried the position if a BR code had been aplied across the board.  And whilst individuals may not necessarily understand the code....they do know what they get paid gross, and what actually hits the bank.....

 

It may be I am just cynical by nature, but I wonder how many of these people ensure they claim the appropriate tax credits/benefits/allowances etc - bet they know what the score is on that side of things.

 

I suppose we have to consider if.....'Not understanding' is a reasonable excuse?  Is it justification for letting someone off if they have rented a property out for several years.....should we just right off the tax because they didn't know they were suppose to disclose it?... 

 

 

 

 

 

 

 

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29th Mar 2012 12:30

Can I just say

I'm pleased that such disparate views are being offered in this topic with no name calling or pettyness.  We all have our own ideas and viewpoints, and as professionals we should be able to appreciate each other's stances, even if we don't agree with them, and conduct our discussions in a dignified manner.

Long live this new AW!

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29th Mar 2012 13:39

... it's swings and roundabouts...

... and I really appreciate every comment that's been posted and I am intending to reappeal... but, in answer to some other points, yes, I have clients that have been taxed at BR and have never queried it, and I also have clients that had never claimed Tax Credits, even though they were entitled, so I think it swings both ways, and I would always do all I could for a client in any of these situations.

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29th Mar 2012 14:56

@jaybee....I quite agree and certainly

if anyone presented the same facts to me I would do my best for that clients....perhaps what I am suggesting is that some clients are 'not as green as they are cabbage looking'.....(if that is the correct saying)...

And yes push the Revenue - they hate a fight.....I work on the basis that the more papework I send them the more likely they are to fold.......just like a burglar they will eventually move to an easier target.  (as long as there is some justification of course - which in this case there is plenty!) 

 

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Harry Redknapp defence

Harry Redknapp’s account in Monaco may have had Harry as sole signatory to the account but he was acting on behalf of his dog Rosie.

There is nothing untoward about this, we all know how cunning dogs are, bitches even more so; absolute puppet masters turning you to do their bidding with those sad eyes and damp noses.

I understand Rosie retired as a mascot from the armed forces following the last defence review and sought employment as a football team manager's companion.  Rosie knew nothing about tax nor did Harry and as a result Rosie finished up with two personal allowances instead of none due to HMRC confusion over an NI number which was on both payrolls at the year end.

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Harry Redknapp defence

PS re the cabbage comment, I believe Rosie was a cauli

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29th Mar 2012 16:06

......LMFAO

....

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By K81
29th Mar 2012 16:18

I have a similar case which I wrote to HMRC claiming ESC A19.

My client (new) is  pensioner of 75 & she paid the tax in the meantime as it was worrying her.

I have phoned HMRC chasing up my letter & was advised that there is a note on their system stating that as taxpayer has now paid the tax no further action will be taken & my letter has been put away!

I am not impressed & I am still awaiting a call back from this conversation.

 

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There's the problem

Your client has shot herself in the foot here.  The concession is for remission of arrears, in paying the tax there are no arrears.  Remember the P800 is not an assessment.  You have to make sure your clients play the game and are not spooked.  It's easier said than done, sometimes you might as well be pushing rope uphill.

If anyone's still reading have a good weekend,.

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30th Mar 2012 15:56

I'm a bit surprised we have people who think all non-industry people understand their tax codes. They see their payslips, see some tax is deducted and assume they are correct in the main. They don't really know what should be allowed, whether their kind of army pension is taxable or not, or why they should only have one personal allowance code - or a BR code. Perhaps 100 ordinary people could be surveyed by accounting web to see just what the public understand? Even intelligent people seem surprised that if they are 40% tax payers they have to pay more tax on their bank interest which already has tax deducted before they get it.

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30th Mar 2012 16:55

Not sure

Frustrated Accountant wrote:

I'm a bit surprised we have people who think all non-industry people understand their tax codes. They see their payslips, see some tax is deducted and assume they are correct in the main. They don't really know what should be allowed, whether their kind of army pension is taxable or not, or why they should only have one personal allowance code - or a BR code. Perhaps 100 ordinary people could be surveyed by accounting web to see just what the public understand? Even intelligent people seem surprised that if they are 40% tax payers they have to pay more tax on their bank interest which already has tax deducted before they get it.

If that's the case, then why bother with tax coding notices in the first place?  Weren't they specifically designed for somebody non-technical to understand - and specifically amended in the last couple of years with that objective in mind?

Isn't this a bit like saying that most people don't bother checking their bank statements, so somebody else must be liable for anything whatsoever which is wrong?

I'm not sure the fact that people can't be bothered to understand equates to not be liable for the tax.

 

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I find with some people,

a good proportion in fact, that they see a brown envelope and immediately, the red mist forms.

I've acted for a number of highly educated people -professor's, doctors, etc etc who either panic or, who haven't a clue what these codes mean. One University lecturer always said that I worked in "black art"! In my experience, codes come through the door and, because it says HMRC on it, many taxpayers honestly believe the details included, will be correct.

It is so easy for all of us, who work with HMRC each and every day, to assume (wrongly) that our client's and the general society have a good understanding of how the tax system works. Wasn't it ever thus?

A clip of what's gone on this week, shows the apparently poor level of common sense, within some of our politicians. What chance has Joe Public?

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