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.
Replies (36)
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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?
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?)
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.
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:
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:
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.
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.
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.
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.
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.
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
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!!
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
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..
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
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.
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