The history – my client is dealt with purely under PAYE. In 2003, she retired from her local government post and started receiving a local government pension. At the same time, she started employment with a charity. Both sources of income added together made her a HR taxpayer.
Unfortunately she was given the normal PA for both her pension and her employment.
However, HMRC did not realise that she was underpaying her tax until 2011 when they raised a demand going back 3 years (2008, 2009 & 2010). Total amount tax due approx. £10k.
We claimed relief under ESC A19 on the basis that it was more than 12 months after the end of the tax year, that HMRC had sufficient information to spot the mistake (P14’s), that she knows nothing about how the tax system works, and was receiving income from 2 large employers, etc..
HMRC have now replied saying that ESC A19 does not apply. Their reply is as follows:
“The reason I have refused your appeal to have your client’s tax remitted is due to your client’s failure to notify us of the commencement of their taxable income at [local government pension]. Due to this failure of notification we couldn’t assess your client’s records and the incorrect tax code was operated against your client’s income. It is the responsibility of the taxpayer to check the code on their payslips to make sure the correct code is in operation.
The first information that we received about your client’s income from this pension provider was on form P14 which we received from this employer.
We are able to give up some underpayments of tax under ESC A19 if the tax underpaid has resulted from our failure to make use of information and certain conditions have been met. Information which is relevant for the purposes of ESC A19 is limited and typically is provided in year by the employer or employee. This does not include the P14 (an employer’s record of pay provided and deductions made) which is received after the end of the tax year as part of the employers end of year return.”
Where do I go from here? The two avenues I can think of are:
- I don’t think it was my client’s responsibility to notify HMRC that she was receiving a pension, surely it was the pension provider who would have acted on either a P45 or a P46.
- It was not my client’s fault that HMRC had sufficient information but was unable to identify the problem(she received a full personal allowance from an employer and a pension provider for 7 years)
However, I think we're getting into a situation where HMRC will just shut up shop, I don't agree with them and they don't agree with me. I believed that my letter claiming relief was quite comprehensive. Would be great to hear if anyone else has dealt with this sort of situation.
Any comments appreciated.