HMRC and State Pension

Paper Return amended
Although the tax return asks how much you received as State Pension, HMRC and the State Pension helpline seem to take a different view! A paper return was submitted showing the actual amount received from becoming eligible in October until the end of the tax year, a period of 26 weeks. The pension is paid every 4 weeks, 6 payments being received. The total was therefore 24 weeks worth of pension. The return was initially accepted and led to a refund of tax. HMRC then sent an amendment based on 26 weeks of pension, effectively cancelling the refund of tax. Both HMRC and the State Pension helpline insist that the correct amount is 26 weeks worth, and the latter even issued a form BR735 on request that states this to be the case. The reason why this is a mess (admittedly a small mess!) is partly that no P60 is issued for the State Pension. Rather than calculating how much has been received by the pensioner, which is possible based on pension start date, HMRC and the Pension Service assume you are paid weekly rather than every 4 weeks.
Apologies for the long first post - will try harder next time!

.....part 2
Firstly, if HMRC has really adopted such a large scale auto processing approach based on third party (albeit Govt dept - but does that make it more reliable?) info which it uses to unilaterally amend taxpayers "self" assessment, how come this has not had wide publicity?

Secondly, is this the start of something much wider? (you bet....but how and when will anyone ever be told?)

Thirdly, and most critically of all, DOES HMRC ACTUALLY HAVE THE LEGAL RIGHT TO AMEND A TAXPAYER'S SELF ASSESSMENT RETURN WITHOUT NOTIFYING THE TAXPAYER OF THIS FACT?
(sorry for shouting, but I feel like doing something a lot worse).

I totally agree it is a good idea that HMRC has the power to amend either minor or apparent errors on returns as submitted without the formality of enquiry procedures.
And I have little doubt that a big proportion of state pensions and benefits are wrongly entered on tax-payer returns.
HMRC having certain powers to make "unilateral" amendments which it believes to be routine and minor and "obvious" (we won't go into how on earth such things are to be decided as the devil would be in the detail) is OK in my eyes.
But can HMRC really be allowed to make unilateral amendments (whatever the reason or circumstance) without appraising the taxpayer they have done so.
Surely this cannot be acceptable under any circumstances.
And I wonder if it is actually lawful.

well, the letter of apology has ........
...now arrived.
It took two months, and for that period and more a widow was being told by HMRC that she owed them £2k instead of being correctly advised that HMRC was due to pay her a rebate.
But that is not the point of my (or others) posting. Mistakes are hardly the sole preserve of HMRC (taxpayers and agents may have made the odd mistake here and there!) .

The letter by the way does confirm the extraordinary position that others have unearthed :
"Our new system automatically checks whether any deduction is included in a customer's PAYE tax code for National Insurance Benefits. If a figure is included in the tax code, then it is automatically included when the Tax Return is being processed. This entry is supposed to be checked and adjusted if the customer has included an entry at Box xx"

and goes on to say (similar to other posters) "unfortunately this was not corrected when xxxxx's Tax Return was dealt with".
(I note there was no statement about anyone being re-trained !!!!! Good, because I do not see that to be the problem)
Just how many un-noticed amendments have been made. And just how many of them are actually correct?

It would seem to me that this "new system" (like Andy, I now believe this happened last year as well as this year) is set up in such a way as to open up the probability of human error. It is riddled with problems.

If HMRC cannot be made to re-visit this "new system", there are some big issues.
This really does need be looked into (Rebecca, I have not been contacted by the person you mentioned).

......end of part 1.

Rebecca, the case I ......
..referred to was a manual return, so presumably no EAT ?

I wrote to HMRC on 15th November asking for rectification, and an explanation as to what had happened.

No reply thus far.
A phone call a few days ago to ask what was happening elicited the response that letters dated 15th November had not yet been reached, but should be reached in next few days.

Moving forward
To all who have posted with this problem, thanks for your input.

We have raised this with the Tax Faculty of the ICAEW who are taking this further, but urgently need more data. In particular, they need to be able to quote specific cases so that HMRC can follow them through the system.

If anyone who has commented has EAT codes, which are issued by the Electronic Business Unit when you notify the problem, could they let me know by mailing [email protected], with EAT in the topic, and I will pass them on.

Many thanks

Third Party Software
In answer to Mel Gibson's query, Third Party software does not have access to HMRC PAYE information. If information is being "amended" in third party returns then this must happen after the return is submitted.

Andrew Bolton
QMS Ltd

Very pleased to .......
....hear a good response was forthcoming, and hopefully that will be repeated for the many other cases (including the one I am dealing with).

I am concerned about "training need" as the response to eliminate the base problem; that sounds an awful fudge.

The available evidence would strongly suggest this is an HMRC underlying system / procedural [***]-up rather than a need to retrain a few misguided HMRC officers who have somehow misunderstood their instructions!!

And the fundamental base point is surely not "training need".
HMRC systems must not allow them to unilaterally amend a tax return without notifying the tax payer that they have done so.

me too
I've had a couple of cases like this where the NIRP figure has been changed. Both Returns were done on 3rd party software and in both cases the NIRP was reduced which benefited the client (but made me look like I had made a mistake in the Return.
When I queried the changes, IR said that what I had put on the Return was not compatible with the information that they had. I was sure my figures were correct to which IR said they were quite happy to change it back. We agreed not to bother!

not sure....
...but case I was made aware of was a paper return being changed !!!!!

P60P
As Euan said why can't they just issue a P60P at the end of the tax year? They issue a P60U for the unemployed after all.

To change someone's submitted tax return without agreement is surely the height of arrogance by HMRC and will result in many pensioners overpaying tax without realising it.

Surely this amounts to theft by HMRC and they could be prosecuted in the criminal courts? HMRC know what's happening and are quite deliberately altering someones tax return incorrectly so that they pay more tax - looks like theft to me.

Hmm, Euan.....
....I think the point you refer to is not the central point folk are complaining about.
I wholly agree that making minor and "obvious" changes, with notification, may well be a good solution to certain matters, and save time, effort and money all round. And I agree that probably an inordinate number of folk get their state pension figures muddled or wrong.

BUT, there are various things HMRC/Govt should do if it is concerned that people are systematically getting state pensions wrong on SARs.

(i) send out annual notices of pension income. The Govt get every other darned organisation to send out annual notices (banks, employers, pension providers - except the state of course !!).
It is in any event a Govt self-interested anomaly that the state pension is paid gross outside the PAYE system in the first place.

(ii) it must surely be MANDATORY for HMRC to advise the tax payer of any unilateral change they have made to a SAR. To change it without notification is just plain unacceptable. This is the first instance I (and most others I have spoken to) have come across unilateral changes to self-assessed returns being made without notification.
In the widow's case I referred to, I now have the evidence in front of me ; the taxpayer's original self-assessed paper return, and HMRC's calculation. The HMRC calculation has changed the return as submitted, but makes NO mention of this fact. No mention at all.
And of course the helpline adds insult to injury by saying the return per their screen is the same as the one shown in the calculation - they do not realise/accept that it is HMRC that has amended the return !!!! They say it is in the return that they have!! They are unable to tell from their screen and access info that this is NOT the return info submitted by the taxpayer. You could not make it up.
So you have to write in with a copy of the original return saying please do not change it this time!!
Lord knows what the computer will do second time around - fine the widow for a late return !!?? That seems more than possible.

HMRC sending out a tax calculation/statement which says "we think you have made an error, and have amended your return" would fit the bill if minor and/or obvious errors of the type you allude to were involved. (and I am sure there are very many of them).
But it is clear this is not what is happening in many cases, where far more substantive (and wrong) amendments are being made without notification of any sort.

Possible explanation
The reason why HMRC may have decided to over-ride the state pension figure given on an individual's tax return is that many people get it wrong.

How often will a client tell you an annual figure calculated as 12x the 4-weekly payment? Or if 13 payments have been included, the first may well be a composite including a couple of weeks at the previous year's rate. The only way to get it right is if the client has kept the Pensions Service letter from February/March before the start of the tax year notifying the weekly rate for the new year - and that is likely to be 18 months ago by the time the tax return is completed.

Whilst I agree with the other comments, I can also see why HMRC may consider their approach to be more accurate in most cases.

Completely baffled
I find it difficult to understand why the system should amend an SRP on an SATR to the supposed PAYE figure when the PAYE figure on so many P2s bears no relation to the actual state pension received by the pensioner. And why when challenged under ESC A19 do HMRC insist that information provided by the taxpayer overrides that provided by the DWP?

Paddy Millard, TaxHelp for Older People

bizarre beyond belief....
....
Just had call from a widow whose SAR has been materially (and wrongly) amended by HMRC without her knowledge or any notification to her that they had amended her return.
(she was concerned her tax payable seemed to be much higher than she thought, but had received absolutely nothing to tell her why)

This really is unacceptable.
How can such a new "process" have been set up in such a way?
How many people are being unknowingly robbed by HMRC in this manner?
It's fine for HMRC to amend minor or obvious errors on tax returns and tell taxpayers (rather than have to open formal query). But to make highly contentious changes without any notification or warning to the taxpayer about the change is just extraordinary.

This was a particularly invidious case. The taxpayer declared Widowed Parent Allowance in box 14, Other Income, as she was advised to do by HMRC when she had called them. I have every suspicion they then added a similar amount (does not seem to be exactly the same) into box 7 or similar and processed both as "income".
Just amazing.

It's done automatically
My understanding is that the process is automatic and will amend the tax return figure to the figure in the PAYE code. Rather a silly assumption that the code is right and the return wrong.

This issue is an understandable source of frustration and has been raised frequently by practitioners at Working Together events. I think there are plans to fix it in April 2009, but don't hold your breath.

We have had that problem
Yes they seem to be making wrong but relatively small amendments to state pensions.
I don't know why.

I have lost my State Pension P60- can I get a duplicate?