Taxation ...and the taxman....

[The Curator]

Gents (and Ladies)....
I have recently retired from just under 39 (Gulp) years Military Service (Light Blue)
I was always under the impression that the 'The Services' were absolutely correct and pedantic as to the amount of tax owed to HMG.
My last Tax Return says I now owe just under £700 to the Inland Revenue....
Having being taxed at source (by HMG), I find this difficult to accept.
Any advice would be welcome.
I appreciate this has nothing to do with 'Flying'...but I did fly for over 30 years with the RAF..
And yes......Beags.
Even shared a Flightdeck with you.........:)

[taxydual]

Challenge it with HMRC.

I did (OK, it was for £346) and won. Two weeks later, I received a P800 telling me I had overpaid tax by £245 and got a refund!

My theory is this; the HMRC error makers are employed to keep the HMRC error correctors in a job. Perpetual motion in the Civil Service!

[PingDit]

I served for 22 years (light blue) and then retired. I taught in the Auggies for 10 years and was then recalled to duty for the Gulf MkII. Anyway, to cut a long story short, I ended up serving another 7 years, retiring at the end of this year. However, my RAF pension was abated upon my re-enlistment to FTRS but I did continue to receive a paltry £50 or so every month from my 55th birthday (3 years ago).
Last week I received a bill from the same taxman requesting £2222.80p as I had offset my personal allowance against my pension. He then sent out my tax codes for both my salary and pension to the RAF who apparently, under PAYE, are supposed to be able to work out exactly what tax I should have been paying.
So in effect, the tax man and the RAF can't work it out between themselves and I end up with the bill.
Following 20 minutes on the telephone with said taxman, I break the news to him that I don't believe I should be paying for their errors. At this point, I'm put through to another taxman who deals with these types of complaint. I've since spoken to the RAF pay bods who are entirely on my side and insist it's a tax office error. I've sent a recorded delivery letter to the taxman telling him it's all his fault and asked him to sort it out with the RAF because he's not getting any money from me!

QED...

[Aim between the eyes]

Can anyone give me an accurate 9 line for the main tax office... :E

[timex]

Unfortunatley they use tax offices all over the UK so you'll need to be more specific.:E:E

You could always try self assessment of your tax? It worked for me.

[Geehovah]

Like you I recently retired. Although the tax man said I didn't need to submit a tax return I filed online every year. Funnily enough I received a rebate each time. IMHO it's always worth filing.

As an aside, although my tax was correct, the system had screwed up my flying pay for nearly a year. One unintelligible pay statement later and I received a bill for £1600 which I'm still paying off:E

[brakedwell]

HMRC cocked up my tax codes too, resulting in an underpayment of income tax (PAYE) on my RAF, Private and State Pensions over the past two years.
This draft letter, which I think was compiled by the Institute of Accountants and published in one of the Sunday Papers is a good starter.


Dear Sir,

I am in receipt of the P800 tax calculation for the (2008/09 and 2009/10 tax year(s))

The calculations indicate that I have a further tax liability. As income tax is deducted at source from my income under PAYE and you were in possession of all the relevant facts regarding my income, I had been unaware that my tax affairs were not in order.

I therefore wish to apply under the provisions of Extra Statutory Concession A19 that the underpayment of tax now being demanded should be written off, on the following grounds:

Either the demand for further tax was issued more then 12 months from the end of the tax year in which HMRC was provided with the relevant information to calculate my tax position correctly:

or HMRC have allowed the arrears to build up over more than one tax year, despite all relevant information being provided to you:

or HMRC have failed more than once to make use of the relevant information provided to you about my income.

I look forward to receiving your confirmation that the further tax liability will be written off accordingly.


Your faithfully

http://www.hmrc.gov.uk/specialist/esc.pdf

[Rossian]

.....i think you'll find that they operate a "virtual office" system. For my service pension I get letters from Ty Glas, for other stuff I've had letters from Leicester, Liverpool and Glasgow and spoken to chaps in Portsmouth and Liverpool. They all have access to the same data base and the notes made by the last person you spoke to. So far, they have all been helpful and eventually we've managed to sort it out amicably.
Make sure you keep notes of all phone calls, when, who you spoke to (both names!! it avoids the "Kevin?? which Kevin? conversations). Be patient polite and persistent and you'll get to the right answer.

The Ancient Mariner

[BEagle]

Remember the old rule about the taxman?

"I don't bother him; he don't bother me!"

That said, the buggers are taxing my pension at 40% this year...:{ Which wouldn't be so bad if I was actually making some money...:rolleyes:

[str12]

If HMRC have made an error in your favour then please remember to demand interest on the monies that they owe you. I did and they paid up!:ok:

[Whenurhappy]

On a related issue, two years ago we received a rather peremptory letter from HMRC stating that 'they had received information that we had sold a property without declaring the Capital Gains....and that HMRC would institute recovery of said CGT' or words to that effect. We sold the house - our first house - in 2004. The CGT they were hoping to recover would have topped GBP40K.

The letter then included a long list of questions we 'were required to answer' to avoid the matter going to Court. A quick check with the Accountant confirmed that the HMRC were 'fishing', and that I should not answer these questions without first being cautioned. I rang the investigator, who was clearly working from home (kids having tea in the background) and pointed out that the house in question was our principal private residence that we would have lived in, but for the 'exingencies of the Service'. I also pointed out that I had a letter from HMRC confirming that it was our PPR, and that over the 10 years we had owned the property (and let it for most of that time) we had submitted annual audited tax returns.

The invesitgator claimed he wasn't aware of the background. I forwarded a copy of the PPR letter from HMIR (as was) by recorded post and a week or two later I received the gritted-teeth response of to teh effect of 'we will not proceed with prosecution at this time...'.

kEY POINTS:

- KEEP DETAILED RECORDS FOR AS LONG AS POSSIBLE (ignore the 7 year rule - HMRC can dig much, much further back).
- BE HONEST AND OPEN WITH THEM (they can be very helpful if you do self-assessment).
- DON'T LOSE YOUR TEMPER...A PROVIDE LOGICAL, CLEAR AND RATIONAL ARGUMENTS.


Oh, a JPAC funny: I was recently asked for a copy of my daughter's birth certificate to prove that she exisits so that I can claim LOA for her. I stated that a certified copy, notarised by a JP, had been submitted shortly after her birth. The JPAC staff - bless 'em - said 'Who's JP?'.

Suffice to say, I was not going to part with the original and have that lost...again!

[Pontius Navigator]

I received the gritted-teeth response of to teh effect of 'we will not proceed with prosecution at this time...'.

I had the same only concerning motor mileage claims. The rules had just changed so that we could get tax relief on the difference between the PTR (and ODR in this case) and the tax allowance. By good fortune I had also just bought a 2.5l car which attracted an allowance of 63p/m and at the same time driven over 2000 miles on Resettlement and business mileage.

I claimed a back of tax relief, which they paid, then audited my returns point out that the Services paid my mileage allowance so how did I have the cheek to claim relief. I replied with 2 barrels of buckshot and thanked them as they had unwittingly revealed a journey that I had omitted to claim. They then sent exactly the same gritted teeth response and refused the extra claim.

Retrospectively what their letter really meant was:

'we know you are guilty of tax evasion but will not proceed with prosecution at this time . . . we are watching you.'

This really besmirches your character and is tantamount false accusation and deformation. You have a right to know 'subject access request' what notes they have placed on your file.

[Rigga]

My Wife's a Taxman, and they still got mine messed up - once.

Best advice is to compile all your evidence into a letter. then Phone them up and talk to them telling them (politely) what your case is and what you would like them to do. In most cases they will want a letter (like MOD they don't trust those electric mail things) from which to start their review of your casenotes.

Keep copies of everything you send and only send originals by registered mail.

I am reliably informed 'they' can officially go back 9 years, but in some cases...

Best of Luck

[The Curator]

Many thanks to all that have responded to this - and especially to the kind gent who sent me a 'P.M.'
Without wishing to apportion blame, it would appear that the RAF were correct in my 'PAYE' contributions, however the Pensions agency were not.....
Apparently I should have been taxed at 40% on my Pension and not the 20% that I actually paid......Fortunately the time period concerned was less than 5weeks, or the bill would have been significantly higher.....
Word of warning to those about to retire (or those who recently have) -
research the numerous 'on-line' tax calculators and make sure you won't get a nasty shock....
Seems I have no alternative but to pay it........Even though it was their fault.
Such is life I guess........:ugh:

[Whenurhappy]

I would urge all those Serving to consider carrying out a self-assessment - it's easy, doesn't cost anything and allows you to claim for charitable giving, professional memberships etc. Clearly, if you have second income (eg partner's part-time work, rental income/holiday letting), self-assessment is essential, and generally beneficial.

Although in the above case it appears that the correct PAYE was deducted, DO NOT rely on JPAC to have made the correct deduction. They are not tax-experts and nor are we.

[thegypsy]

The Curator

State old age pensions are paid without tax being deducted and it is your responsibility if you have other income that takes you above the personal tax free allowance to inform HMRC so that they can adjust your tax code. Even more important if it puts you in the 40% bracket.The pensions agency were not at fault as you mention.

Ignorance is not always bliss.:ugh:

I know of someone in my old company who had his state pension paid for many years without being taxed at the 40% and had a nasty shock tax demand for several thousand£ when tax man discovered his code had not been changed to reflect his new additional income where tax was not deducted at source as is the case with the state old age pension including serps

[Pontius Navigator]

Thegypsy, you are of course correct although the pension in question was a service pension which is taxed in its own right and not a state retirement pension.

It was still TC's job to tell HMRC. Mind you, given the time scale, the tax code would not have been changed in time.

A word of warning to others taking a retirement job. That too might also keep you in the 40% bracket at least in the year in which you retire. Although that job will also be taxed HMRC need to know of all sources of income.

Mrs PN at one time had a portfolio of 4 jobs in a year and with different tax offices now down to one plus 2 pensions. It was not unusual to get 8 letters from HMRC in one day. I now have 4 pensions, soon to get a 5th, and I can see the need for tax returns for ever more.

[brakedwell]

Regarding pensioners, the main reason for the tax code errors was HMRC's failure to reduce the over 65 personal allowance of £9300 by £1 for every £2 for income above £22300 until it dropped to the standard single personal allowance of £6300. For someone earning £37k this results in an underpayment of £900 p.a. Robber Brown's ever increasing and devious small print rules must take a lot of the blame. :sad:

This error is covered by Statutory Notice 19.

(My figures are rounded down or up for simplicity)

[Pontius Navigator]

brakedwell, quite right. The marginal tax rate for those with more than £23k is therefore 30% not 20% as generally believed. For that reason, where possible, additional income in attributed to Mrs PN and not me.

Some trival interest, such as on a Tesco joint clubcard account is then proportioned 50-50 to minimise my tax. We keep this interest to less than £2 so it attracts no tax.

The other thing to ensure is that any payments attracting gift aid continue to be made by, and claimed for, by the higher tax payer even when tax appears to be at 20%!

[dogle]

"Tax doesn't have to be taxing! (but we'll do our utmost to make bloody sure it is)"

I had much sympathy for Revenue staff when a few years ago they were lumbered with new software which, I mused, might have been written in the Far East because it appeared to have no regard for Western accounting processes. They got my tax code right in the end - at the third attempt - when I held their hand and helped them disentangle their rats' nest. I was able to do this just because I had kept meticulous records - yes, that is so important.

That sympathy has now evaporated in the heat of searing evidence of wanton job-creation which has just hit my desk; hmm, I guess they are facing cuts as well ... the mind runs to kukris.

Tips:

Yes, it is a very good idea to do your own sums. It is not hard if you have the right information, and don't just rely on the self-assessment bumf which is something of a mushroom job.

Be wary of HMRC "help" sheets, some of which are poorly written and may be expensively misleading. The taxman's internal guidelines are now readily accessible on the HMRC website; however, in a case of ambiguity it can pay to go the extra mile, right back to the wording of 'The Act', again easily available online.

Although the pulp-fiction tax books are not really up to much, I have in the past found Tolley's Tax Guide to be very helpful (the serious grips and dodges for grown-ups, in fairly plain English). It is somewhat expensive; may be worth checking your library service for a recent edition.

[Wander00]

If you think UK tax is difficult, try the French system!

[cornish-stormrider]

Well what do you expect with a nation of striking cheese eating surrender monkeys....:E

[thegypsy]

WanderOO

I thought tax was voluntary in France or perhaps it is Italy I am thinking of.:=

[BEagle]

A gypsy discussing taxation matters?

Riiiiiiiiiiggggggggghhhhhhhhhht.....:p

[dogle]

Well, now that we have departed from the serious stuff, Beags' remark reminds me of a wonderful gypsy-esque character who reckoned he had the Revenue sorted. His real liability was probably enormous, and his ploy was to drop from time to time into any tax office, as a scruffy old man, and offer them a tenner 'in case they needed it'.

They were of course obliged to accept and record these payments, which he considered not only to throw their system into complete confusion but also to reflect him as a cooperative taxpayer.

His scheme seems pretty close to that described by the late Prof. C. N. Parkinson as 'the Chinese system of tax evasion' (in his splendid book 'Parkinson's Law', where 50 years ago he was busy predicting, inter alia, that the RN was going to end up with more admirals than ships).

The 'Chinese system' depended on an appreciation of the bureaucratic cycle time, and corresponding at intervals to ensure that your file remained near the bottom of the pile. With the Revenue's current prowess in mastering the joys of IT .... could be a very long cycle time.

[Pontius Navigator]

And on evading the odure, I heard this from a reliable source, a former Lightning pilot and Red Arrow.

It is how to avoid 3 points on your licence.

You get the usual plus £60 fine. You immediately send them a cheque for £61 or some such. They are then obliged to send you the cheque back or refund the pound. If they refund the pound then DO NOT CASH the cheque. If they return the cheque simply post it back again.

While your file remains open they do not put the points on your licence.

warning: I haven't tried this and know no one who has :}

[cornish-stormrider]

Yeah ok PN, I wish you luck with this one.....

I'd just drive so I don't get 3 points. (hint) the cameras are big, yellow and you can get the location from t'interweb

[Pontius Navigator]

Yeah ok PN, I wish you luck with this one.....

I'd just drive so I don't get 3 points. (hint) the cameras are big, yellow and you can get the location from t'interweb

I have no intention of trying.

However you are wrong about the cameras.

Since 2007 cameras no longer need to be painted yellow so you need to be more careful even if you do know where they are. Of course in Scotland they are different again.

[thegypsy]

BEagle

Careful what you say as we eat dogs:ugh:

[Willard Whyte]

I would also point out that Lincs police have a number of 'Talivans' that have been quite evident in the county over the last few days.

Bloody outrage, they should be stopping the zombies driving, not picking on honest folk who choose to travel from A to B in a time shorter than that which has arbitrarily decided.

[BEagle]

Eat dogs? Don't you mean hedgehogs?

Kushti bok!

[Cornish Jack]

Just to return to the tax issue ...
My pension was assessed and split following my divorce. Our fine and competent pension providers failed to notify me of the change in pension until some seven months AFTER initiating it. Result - overpayment! Much fairly 'lively' correspondence evetually produced agreement that repayment would be made over approximately three years. The repayment is deducted at source (so I never get my hands on it ) and the remainder is at a level LESS than the tax deducted!!! Never have understood financial matters and have no particular wish to, but I have a feeling that I am being 'shafted'. When the original overpayment was made, that money was taxed at source. The amount being repaid is (as I see it) money that I am NOT RECEIVING. Should one be taxed on money which does not accrue to one???
Puzzled, Norfolk:confused::confused::confused:

[GemDeveloper]

There was a bit of a fuss about six months ago, when HMRC sent out new tax codes generated by their super new computer system... the one with the little wooden balls that slide along the wire frame... you know, they come from the Early Learning Centre...

According to my new coding, my (pension), income suddenly had propelled me into the 50% tax bracket... if only... per what others have said, I found that a polite and patient telephone call can be rewarding. It transpired that, in transferring the data to their new system, they had pulled across a corrupted file of my pension details, corrupted as to its name, but not as to its payments, and saved it about three times so that their system thought I was getting multiple pensions...

I do all my (and the Mehmsahib's), tax using the on-line system. It's pretty straight forward, provided one works one's way through it step by step. I have already 'done' the return on an Excel spreadsheet, and, at each step of entering data into the on-line system, I get it to calculate the tax owed, and check it against my spreadsheet. That way, if I make a mess up, I know where it is likely to be. The help desk people really are, if you ring them up and ask where stuff is supposed to go. And a big advantage of doing it on-line is that if one is owed money by HMRC (as the Mehmsahib sometimes is), then it appears in one's bank account within a few days of clicking the send button...

For the few folk with pensions originating overseas, remember that you pay tax only on 90% of the income...

And keep meticulous records... AFAIK, they are entitled to ask you up to seven years back...

And... I didn’t realise that thegypsy was Korean... he didn't confess to that the last time I was in touch with him...

[dogle]

Jack, strong smell of rat there. If your pension provider is deducting tax at source, they must only do it once on the same money.

To put it another way, if they are calling back money on which you have already paid tax (=had deducted), they should have credited the tax deducted on the clawback against that deductible on your current pension payments. (Any tax liability on the clawback, presumably, now devolves to your ex and is not now your problem).

I can't be sure without seeing the numbers but if this is the case, possibly the numpties at your provider are not quite up to the job, yet could perhaps sort things properly and fairly easily given a little friendly enlightenment from your end.

Otherwise, you can ultimately claim any overpaid tax back fom HMRC, but that is more paperwork and (I say again) if you have good records to hand that is a huge advantage in sorting things.

Please sing out if you need a hand on this one, per PM.

[Cornish Jack]

Dogie - thank you for your input. I won't, for the moment, take advantage of your kind offer but greatly appreciate it.
My problem is that I have never understood tax/financial affairs and while I can cope with the on-line self assessment process, I have NEVER (in spite of being reasonably numerate) managed to produce the same results as HMRC. Their wooden balls/abacus probably operates with different software:(
My last S/A generated THREE responses from different areas of the HMRC empire all giving different tax codes and assessments and a final one saying that I didn't need to do a S/A in future:confused: I think that, perhaps, my first port of call should be the local Tax Office and see if I/they can make sense of what is happening. Unfortunately my head starts to hurt at the thought:ooh: If I manage to brace myself sufficiently for the fray, I shall report back:ouch:

[dogle]

The point has been made many times in these pages that automation is all very fine save when it keeps you in the dark and, if you have failed to maintain your hand skills, drops you deep in the dark Brown stuff when it screws up. The very simple hand calculation shown on p.TRG24 of the UK Tax Return Guide gives, within its stated limitations, a good, quick and easy feel for your tax situation; better still, it helps to demystify the whole business if you are fearful of, or unaccustomed to, doing your own tax calculations.

For the few folk with pensions originating overseas, remember that you pay tax only on 90% of the income...Top marks, GemDeveloper, and thanks! ( I'm looking forward to joining that few ).

Given the membership of this forum, it may be a biggish few ..... so for quite a good synopsis of UK wrinkles for us 'migrants' of various sorts:-

Tax on overseas income : Directgov - Money, tax and benefits (http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/LeavingOrComingIntoTheUK/DG_10027480)

and for HMRCs nitty-gritty on pensions inbound from foreign:-

Foreign pensions (http://www.hmrc.gov.uk/manuals/eimanual/EIM74500.htm)

Another pensions matter - if a pension award is delayed or backdated across a UK tax year end you may insist on being taxed on it on the 'accruing' basis, i.e. when you were entitled to it, rather than when it finally arrived. This can save a packet for someone who has e.g. landed a retirement job in the tax year when the delayed payment is made:-

Amount of pension income charged to tax (http://www.hmrc.gov.uk/manuals/eimanual/EIM74101.htm)

[GemDeveloper]

Top marks, GemDeveloper, and thanks! ( I'm looking forward to joining that few ).

Thank you kindly, Sir, he said...

One other thing that may be helpful for those who have a combination of a U.K. pension, on which you'll be taxed at source, and a foreign pension, which you will receive gross. Of course, you have to pay U.K. tax on (90% of), your foreign pension, but...

... your Tax Office may try to take that tax off you by adjusting your Tax Code so that the PAYE on your U.K. pension effectively mops up the tax on your foreign pension. You can agree to that if that makes your life easier, but you don't have to agree. You can opt to pay the additional tax in two instalments. These are due on 31 January of the Tax Year, and 31 July following the end of the Tax Year, concerned, although the first time that you do a Self Assessment, one only has to pay by 31 January following the end of the Tax Year. Once one has settled into a 'steady state' routine, and so one's incomes are fairly predictable, then estimating the amount is relatively easy, and the on-line self assessment will calculate an amount, based on your previous year's income and tax position, for a Payment on Account in January following the end of the tax year.

Paying as two instalments means that you keep the cash in your interest bearing account for as long as is reasonably possible. And... another tip... paying on-line using your debit card is very straight forward, and it has the advantage that you know that they've got the money... so, within reason, you can pay almost at the last minute. I have a colleague whose cheque to HMRC was stolen in the post, and thus never received by them. Fortunately, he noticed that it hadn’t been cashed, rang the Help Line, and they were very sympathetic, as his wasn’t the only one, of course, and they didn’t penalise him for a late payment.

If you end up owing a little more one year than the two Payments on Account have taken, perhaps 'cos of a pension increase (what?), then that's fine. But if you have a windfall in a particular year (so, for example, a Life Policy matures and you cash it in, thus generating a chargeable event), you will pay more tax in that year, and the system tends to assume that you will be getting the same income in the following year, and thus calculates your half yearly payments as being more that they will actually be when you do the Return. You can reduce the amount of a Payment on Account... but if you over-egg the reduction, then they charge you interest on the difference.

Hope that all helps.

[cazatou]

Lots of useful tips as to how to avoid overpaying tax to a bloated Governmental System. Surely the thing to do is change the system.

The US "PARLIAMENT" has 100 Senators and 435 Representatives to represent a population of 308 million - whilst the UK Parliament has 650 MPs and 777 voting Lords for a population of 61 million .

Time for a cull?

[GemDeveloper]

Lots of useful tips as to how to avoid overpaying tax to a bloated Governmental System. Surely the thing to do is change the system.


Don't get me started... well, you just did. One of the consequences of all the 'fiddling around the edges' that has gone on in the last 10 or 12 years is that the whole system is so much more complicated... the tax guides that are published every year get thicker and thicker... there are all sorts of 'little things' that are used to raise what I suspect are, relatively speaking, piffling amounts of the total tax take. Putting a tax on insurance premiums is one of my ‘favourites’... all the things like that take a huge amount of time and effort to administer... for what?

I could have written 'one of the unintended consequences of all the fiddling around the edges'... but I am sufficiently old and grey and cynical to imagine that it was all done with the full knowledge that there would be still more Government employment created, with incumbents who would vote for the Government who employed them...

Whilst it might, as a headline, be a very unpopular move, I do sometimes wish that some party would have the courage to say: "Right, we are going to stop all these complex bits and pieces, raise the basic rate of income tax, and we'll halve the number of Civil Servants that you are paying to administer it." I realise that this would be a tough message for the HMRC, etc., staff, who, as we have all agreed, are very decent and helpful folk, but how long can we go on paying for such complexity? And, it's only a short time ago that the basic rate was 25%... and yet everyone expects more from the Health Service, people are living longer and so drawing pensions for longer, and so we have to scrap the Harrier Force, decommission the Ark, and put the Prince of Wales into mothballs before we get any use out of it (the carrier, not King Designate).

Sorry, Mods, rant over. I'll just go and lie down in a darkened room for a bit... :ugh:

[brakedwell]

and put the Prince of Wales into mothballs

What a brilliant idea :E

[Yeller_Gait]

Of course, you have to pay U.K. tax on (90% of), your foreign pension, but...

That is a big surprise, I did not realise that people retired to the UK, I thought it was all one way traffic out of UK.

While on the subject, anyone any good ideas how I can legally avoid paying tax on my UK pension overseas, especially as it is worth so little that as of next year I will not need to pay UK tax on it?

Y_G

[RAFEngO74to09]

Yeller Gait

Everything you need to know is on the HMRC website. Look for the Dual Taxation Agreement (DTA) between the UK and the country you are now a resident of. In the case of government sourced pensions (eg Armed Forces), you have to pay tax on it in the UK unless stated otherwise in the DTA. In my case (USA), the UK-USA DTA states that you may cease to pay tax on UK government sourced pensions (and pay in the US instead - clearly advantageous) once you have become a citizen of the US (normally takes a minimum of 5 years). I have checked with HMRC and confirmed that it is not necessary to also renounce UK citizenship to do this and that one would also still continue to receive the UK senior citizen pension in due course (provided the requisite contributions had been maintained).