The taxpayer has been subject to PAYE for years. She accepted all paperwork issued by HMRC and deductions made by her employer and her Bank/Building Society. She was a small earner and was not asked to complete Tax Returns. On 19 January 2011 the taxpayer received out of the blue a tax refund for 2008/09 and 2009/10 of £462.08. She took advice and it became clear that her tax deductions had been incorrect. Tax Returns were prepared for 2004/05 - refund £764.19 and for 2005/06 to 2007/08 for £1434.63. HMRC refunded the £1434.63 direct to the client but refused to refund 2004/05 as it was out of date (submitted February 2011 became out of date after 31 January 2011).
There was a repeated coding error by HMRC. My clients husband had died on 08 May 2003 and HMRC had restricted the taxpayers personal allowance for Widows Bereavement Allowance for three years when this should have only applied to the year after death. So it can be seen that this had a direct effect on the 2004/05 year. In addition the Bank/Building Society had deduected tax at 20% when based on income it should have been assessed at 10%.
The bottom line is that HMRC has refused to repay 2004/05 as it is out of date. Our case is that the position our client finds itself in is due to official error. I believe that we should write to HMRC again pointing out the reasons (their error for 2004/05) why the refund came about and asking them to reconsider their stance. We feel that we should indicate that the taxpayer is considering an appeal to the First-tier Tribunla (Tax). We also are considering if s 32TMA could be brought into use.
Any comments or further suggestions will be appreciated.