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Frustrated man

HMRC removes pensions tool after errors

24th Apr 2018
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HMRC has removed its online pensions relief calculator after it gave savers incorrect information and potentially cost them tax relief.

The issue relates to a web page which allows users to check their annual pension savings allowance. The error was spotted by tax experts at Royal London. HMRC admitted in writing to the mistakes, and finally removed the page in question.

“This time round, we identified the problem, we contacted them and they apologised - but they left it up,” explained Steve Webb, Royal London’s head of policy and the ex-minister of state for pensions.

When Royal London raised the issue with HMRC on 16 April, the tax authority said it was “aware that since 6 April 2018 the Annual Allowance calculator is showing less annual allowance than is due for the year 2017/18 onwards”, and it would fix the issue as soon as possible.

“When we went to the media, that’s when they finally took it down,” said Webb. “That’s unacceptable. People can use the site and act upon it. They could look at the number and make an important financial decision.”

This isn’t the first time HMRC has responded slowly to a pensions error. Last year, it admitted to a different problem with the same website. The September 2017 Pension Schemes Newsletter acknowledged “an error in carrying forward unused allowance from 2012/13”, but the issue wasn’t fixed until  the November 2017.

In the interim period the website continued to provide incorrect data for some taxpayers. “If you go to a government site, you just expect it to be right,” said Webb. “It’s inconceivable that it wouldn’t be right.”

The latest error is made worse, according to Webb, by the fact that calculators are an important tool as pensions tax relief has become complex. For most taxpayers pension contributions of up to £40,000 per year qualify for tax relief.

But since 2016/17, higher earners have been subject to  a reduced allowance which can fall to as little as £10,000 per year. To limit the impact of this change, taxpayers affected by the change can carry forward unused annual allowances from up to three years earlier.

This was the calculation that the HMRC tool was getting wrong, leading to individuals wrongly believing that they should stop saving into a pension because they have exceeded their annual limit. According to Royal London, one customer who used the site was told that he was limited to £10,000 in pension contributions for 2018/19, when the correct figure was around £35,000.


Replies (14)

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Red Leader
By Red Leader
24th Apr 2018 11:57

Surely it can't be the case that the tax rules created by HMRC are too complicated for HMRC to understand?

Thanks (4)
24th Apr 2018 12:41

The arrogance of HMRC.

''When we went to the media, that’s when they finally took it down,”

If that had been in the private sector there would have been hell to play this type of incompetence is unacceptable and should be publicised to a wider audience.

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By rockallj
24th Apr 2018 14:30

If the repercussions of this were not so serious, then it would be laughable. Any other organisation dishing out such nonsense would soon fold. HMRC needs to get its act together quickly.

On the phonelines and in correspondence HMRC are pushing website contact down our throats, so they MUST get the online detail right!

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By Terry Hyman
25th Apr 2018 09:49

Yet another reason to believe that MTD will be disastrous!

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By steve01257
25th Apr 2018 09:51

In fact the reduced allowance is now only £4,000 so shouldn't the penultimate paragraph use that number?

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Replying to steve01257:
By raycad
25th Apr 2018 13:16

"In fact the reduced allowance is now only £4,000 so shouldn't the penultimate paragraph use that number?"

I may be wrong but I think the £4,000 figure is the current cap on "recycled contributions", i.e where someone has entered into flexi-access drawdown and still wants to make pension contributions. This figure was of course £10k until the last tax year.

The £10k cap was and still is the limit for relief on contributions made by those not in flexi-access drawdown but are well into the top tax rate of 45%. It was only "co-incidentally" the same as the re-cycled contributions cap.

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Replying to raycad:
By SteveHa
25th Apr 2018 16:16

You aren't wrong. It is only after a drawdown that the £4K cap kicks in.

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Replying to raycad:
By steve01257
25th Apr 2018 16:52

Thanks for that clarification, it is the "recycled contribution" number I was thinking of. All this "pensions simplification" has left me confused!

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By steve01257
25th Apr 2018 09:53


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By C.Y.Nical
25th Apr 2018 10:03

I think there are three problems.
First, failures like this demonstrate that something MUST be done to simplify the tax system. They are good evidence that the rules are now too complicated. This is a policy issue and therefore the principal responsibility for dealing with it is political. Part of this problem is the apparent failure of the Office of Tax Simplification to fulfil its remit, despite the enormous salaries and benefits drawn by the people who run it.
The second problem is the fact that despite having some time to do so HMRC failed to correct the errors in its calculator and had to take it offline. This, and the woeful inadequacy of the new online reporting system for CGT, are very good evidence (I would allege that they are irrefutable evidence) that HMRC's IT people and the officers responsible for briefing them lack the expertise and competence necessary to implement MTD. I myself am currently appealing an overcharge of my income tax which arose because HMRC's own incompetently written software convinced an officer to overcharge me.
The third problem is the lack of collective action by the grass roots of the accountancy profession. All I see is people bleating about what's wrong, year after year. Is there nobody who has the time and professional standing to start a group which could put pressure on the formal accounting bodies and the politicians to solve these problems?

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By tedbuck
25th Apr 2018 12:45

I absolutely agree with C.Y.Nical.

The Accounting bodies bleat but there seems to be no concerted pressure on HMG or HMRC to get their act together. I know that some of the ICAEW Tax Faculty bang their heads on the HMRC wall but it seems to have little effect.

I think that every time we have these problems a complaint should go to the Chancellor. Every time HMRC is unhelpful over codes (which seems to be most of the time as they make so many mistakes) a complaint should go in.

Every time the system fails elsewhere a complaint should go in

Eventually HM Treasury would be buried under paper and they would get off their behinds and engage their brains and do something useful. Perhaps that is asking too much.

The best thing they could do would be to abandon MTD until such time as they actually understand what they are doing and simplify the system to the degree that John Doe has a chance of understanding it.

A tax lecturer revealed a while back that the Treasury had to call them in to explain some aspects of a recent budget that they couldn't grasp. No surprise there.

There seems to be a perception in HMRC that the public read what they issue (if they bother to do so) but it simply isn't true and if they do it is forgotten with the next thing they read. Make it simple or it won't work.

As for all the emails we get from HMRC telling us this that and the other - do they really think we have nothing better to do?

It's a real Pig's breakfast

Thanks (1)
25th Apr 2018 12:56

Shocking , and shocking the only time you generally see an efficient response is when an organisation is threatened with media exposure .

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By wyoming
25th Apr 2018 14:46

I agree that there are basically two issues here. There is the more general one concerning HMRC's inability to provide technically competent online tools and calculators (with all the concerns that this throws up concerning MTD etc). Then there is the specific issue of pension tax relief and the fact that, due to a succession of changes, this area has become far, far too complicated. When you have reasonably informed members of the tax and financial planning professions throwing their hands up in horror at the complexity of the issues involved and the near impossibility of giving coherent advice, you just know that the situation has gone beyond farcical. I suspect that we will ultimately end up with some sort of flat rate tax relief system re pension contributions. Not necessarily the best answer, but at least it might lead to a situation where the averagely educated person can understand the principles involved.

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By petersaxton
26th Apr 2018 03:57

I checked my "state pension"
I entered some information as requested and got a figure back
when I got paid my pension it was less
when I phoned up and asked they said that the figure quoted was the total of state pension and private pension
I asked why they gave the wrong information
and I was told that the calculation was nothing to do with them

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