HMRC get your tax code wrong (AFPS related)?
 

Nicole Blackmore is senior personal finance reporter at the Telegraph. She is following up a piece about HMRC getting tax codes wrong (following service discharge) and then chasing some ex-servicemen and women for thousands in unpaid debt a few years later.

The error seems to lie with HMRC and revolves around it not processing data which was correctly supplied by the individual in good faith. I think back, and I know that I had issues with mine - it might be the case that the taxman can just not accurately input data which relates to AFPS. And if not, why not?

Although she managed to get HMRC to quash a similar claim against an ex serviceman recently which ran to a few thousand, she's now trying to scope the extent of the problem. Nicole is following this thread, so if anyone has any evidence or anecdotes about it please feel free to post them here. If you're happy for her to contact you, just message me your contact details.

Mods, not strictly aviation but definitely a mil problem. Hope you don't mind.

Voxpop, does Forpen have any info that might be useful?

Not sure if this is what is wanted or not ... but when I left 6 years ago I was dealt with by 3 different tax offices, one for RAF pension (AFPS), one for the FSAVC pension and the third for the Ministry of Justice income from the part time job.

Each Office insisted that all my Personal Tax Allowances were to be applied to the "other" incomes and all put me on Basic Rate, effectively I had no Personal Allowance for nearly 6 months!! The whole Personal Allowance "should" have been (and eventually was) applied to the RAF Pension.

HMRC always "blamed" AFPS for not giving them the correct info, but as I pointed out on several occasions, HMRC "tell" AFPS the tax code .. NOT the other way round !

Eventually resolved by recorded delivery letters to as senior a name in HMRC as I could muster, my MP, and the relevant Ministers, threatening letters to the press etc etc. I suddenly had a phone call from HMRC asking a couple of details then new tax codes and a very welcome rebate !!

The answer as given was quite simple ... Tax Offices don't converse with each other, they each do their own thing !!

HTH

..and boy do they do it slowly. Current reply time is over 5 months for me. They claim on their website that 2 months can be expected. Rubbish.
(Mine is a Tax/Pension issue, but not tax code)

Or this:
Retired Oct 10.
Sorted out VS overpayment to Jan 11
Filed tax return 10/11 in May 11.
Sep11 my union rep reminded my old boss to pay me a bonus. Received Oct 11.
Filed tax return 11/12 in May 12.
For year 12/13 IR applied all my personal allowance to my MOD salary which of course was zero and taxed my civil service pension at 50%.

Their excuse was that the MOD had said I was receiving a salary despite it being a one-off. I managed to get it sorted in-year.

I've always had any tax 'adjustments', up or down, sorted very quickly by HMRC. I always telephone them as soon as I'm aware of any changes, or post forms as necessary. It's always been sorted within a couple of weeks - usually a couple of days if I've spoken on the 'phone.

Mind you, I'm a bit obsessive and keep a monthly-updated spreadsheet of all my income.

The actual repayment in my case did occur within 2 weeks, once the change had been authorised. The problem seems to be with the parts of the HMRC that review cases and make decisions. The last reply I got was 2 months after sending, and said "I'll send for your file". Nothing done, so their IN tray is at least 2 months deep. This was over 3 months ago.

Fox3, IIRC there is an automatic 4 week delay. After 4 weeks we rang and a young man not only agreed to send me my rebate by cheque but my wife's too. The rebates were below their automatic refund level.

This is the piece about a military pensioner that Nicole is following up.

'Taxman error left me with £4,600 bill after retirement' - Telegraph

For me, it was a demand of £4100 in 2010. I wrote and put my case that ESC A19 applied and it was an HMRC error. I received a letter cancelling the demand following a further exchange of letters and some phone calls.


No, I'm not interested in talking to journo's about it.

I used ESC A19 successfully for a friend who'd received a demand for £2500 uncollected PAYE back tax relating to two recent years. They allowed the earlier year and refused the more recent year because it was too soon for ESC A19 to operate. I was able to inform HMRC that the Treasury Minister had recently issued an instruction to HMRC, that where their failure to collect PAYE back tax related to the State OAP, under no circumstances were they to attempt to do so. There was no further argument. It did not matter that there was no actual apology because I discovered that the failure to collect had been going on for several previous years, though they were issuing plausible tax codes and patronising reassurance each year.

Regrettably this sort of thing is commonplace. The LITRG website provides a wealth of otherwise little known detail, not only for unrepresented low income folk, but for anyone with PAYE problems with HMRC, which enabled me to win that one. It is a philanthropic arm of the Chartered Institute of Taxation.

There is a legal precedent from a few years back which basically says that if one UK Government Department has been given the information, ALL Govt Depts are deemed to be aware of it. I imagine it should equally apply to different branches of the SAME Dept – ie HMRC. I could probably find a reference if anyone wanted.

All the above should apply equally to any UK based PAYE customer of HMRC, whether military or civvy. I have no knowledge of ex-pat stuff though.

I would add that a Tax Code is only a tax officer's best guess for the current/next year. Whether the error is large (requires dealing with now) or small (could be postponed) the true position will usually only emerge after the end of the tax year. Anyone with any doubts would be well advised to do their own calculations for verification, though some ex-colleagues of mine (civvies) who are PAYE and are not required to submit tax returns, and who should know better, still leave it to HMRC to do the annual reconciliation, and then wail ** when faced with unexpected demands when they really have no idea if the demand is correct or not. An acquaintance recently received a surprise demand for several grand .... and paid it.


** BTW I am not referring to anyone posting here about AFPS of which I have no knowledge. In any case, if reasonable self verification had been carried out, there should be no problem unless HMRC had made an error - perhaps later - or had invented raw data - as happened in a couple of my strictly amateur cases.


LFH

Retired on a Friday in 2011 and started FTRS on the Monday.

AFPS75 lump sum in bank account by the following Friday. :ok:

Then the fun started. I started with both pension and pay on D0 (ie. 40%). So I called HMRC and the nice taxman adjusted the tax codes.

By Dec 11 the codes still didn't seem right and so I called, by this time, for the third time and the taxman finally explained that my pension should have been D0 from the start as my FTRS pay was above the 40% threshold. So he adjusted the pension to D0 and then put me on an adjusted tax code to try and sort it by Apr 12.

In Apr 12 I got a tax bill for ~£1200! :eek:

I complained that JPAC/SPVA knew how much pay and pension I had been paid in FY11/12 - the figures are available for everyone to see in various places on the internet. I stated that JPAC/SPVA had messed up my PAYE and therefore they should be liable for paying my £1.2k as they made the error - https://www.gov.uk/government/upload...ction-paye.pdf

I had a very nice note back from HMRC saying they thought that it was my fault and that I would be issued a new tax code for FY12/13 to recover the money owed. I was thus ~£100 per month down for the next year in take home. :(

I thought I had a good case where effectively the same employer had messed up my PAYE - but apparently not! :ugh:

LJ

Is there a time limit that once expired you cant be chased. I ask because this morning I had a tax demand from the year 2004 !!!

LJ, in my case, similar to yours when I retired first time, I could see the Charlie uniform and was quite happy to benefit in the short term and pay back a lump sum in their long term. In those days interest wad paid on deposit.

Sounds like I got off lightly

My pension was taxed at BR from the outset and at one stage I had tax codes for 3 different sources, all penalising my tax-free allowance on account of the others, and even adding in the other odd restriction by inference (business phone).

After a couple of years I managed to get rebates at the end of each Tax year, only to be handed a demand based on the same scenario as the one I had just been over-taxed with.

Calls to the tax office (40 mins waiting each time) would furnish me with a new set of tax codes - only to be countermanded a few days later by another set of erroneous ones.

9 years later, my accountant managed to get through to a knowledgable grown up at HMRC and has got them to accept that I declare all my income in each year's tax return - and my pension is now paid without an abatement.

The whole thing smacked of poor outsourcing; disjointed departments and a lack of expertise at the coal face - often a symptom of a poorly-specified outsourcing contract.

I'm with Willard, not had an issue with a mil pension, a full time job and still in the Reserves so three income streams. Always kept them informed and they have always treated me right......I think.

Yup, happened to me too. Retired 2013, told HMRC to apply my tax code to my main, rather than pension income for that year. In 2014 they applied my tax code to both my pension income and my main income, which obviously meant I got my pension almost tax free. Very nice obviously but I got a letter soon after I noticed myself saying that my tax code for 2015 would be adjusted to account for the overpayment.

Not looking for any sympathy: it's just rubbish administration by the HMRC which needs sorting.

I was advised when doing resettlement, always to talk to the tax office and make sure they know your circumstances. I have always had my (commuted) pension taken out of my personal allowance and then had my salary adjusted by my employer via a tax code issued by HMRC. I have individually had to make sure my employer knows my circumstances as most do not understand how military pensions work. This has saved me a real balls ache of facing tax demands as HMRC informed me, there is no time limit for claims although they may disregard anything longer than 12 years at their discretion. Ourselves, we are supposed to keep records for a minimum of 6 years.


I do know of former colleagues who have been bitten by having the personal allowance claimed against their pensions and not informing their employers and having the same applied to their salaries and HMRC catching up with them some years later and smacking them with a large tax demand.


According to HMRC guidelines, there is no defence in ignorance as there is a great deal of information out there via their own offices, accountancy firms and financial advisors.


If you call them and state that you think your are due a rebate and provide them with the relevant information, you will get the rebate fairly swiftly as they have a service level agreement to investigate claims within a specified timescale. The taxman will also tell you all the various things you can claim for, they do not keep it to themselves (I claim for replacement uniform and uniform laundry which amounts to circa £500 per year, this comes a an adjustment to your tax code).


Just be careful, if you are economical with the truth to the taxman he will bite you and he wont believe that you were unaware of the rules.

The thing is I did tell my employer, my pension provider and the tax office about my issues many times over a 3-4 month period - they still c0cked up my PAYE so that I got a tax bill! :ugh:

LJ

Nicole's piece made the lead of today's Telegraph. If you've left, or are about to leave, don't let apathy cost you. I know she's working on some of the other feedback generated here - there's a couple of great quotes in there too. :8

Millions with multiple incomes at risk of shock tax bills - Telegraph

Nice one Al :ok: .... LFH

Top quotes Al, well done.

Of course for being quoted you owe us all a slab of beer. Harsh but fair.

:ok:

Nothing new here. I left the RAF in 94, and took on a part-time paid job as an RAF Sports Secretary. My life was subsequently a confetti of Coding Notices, endlessly contradicting each other, moving me up and down the scales ... and as I had to calculate my own pay/tax in my part-time job, it was mind-blowing.

I escaped (I thought) HMRC when they finally told me (around 2001) that my affairs were so simple I no longer needed to submit an S-A return.

I moved to Jersey in 2005. Suddenly, a couple of years ago, despite having an NT (No Tax) coding, HMRC suddenly started demanding S-A tax returns again ... which I did, entering 0 0 0 0 0 and some sarcastic comments in the appropriate fields.

It took TWO years to eventually get the idiotic non-joined-up system to remove me from the system again - in May 2014, some 9 years after I left the UK for good. WTF?

Interesting warning Al, thanks. I have some 'other' income but only get PAYE'd on my pension. Her indoors is just embarking on a second career so we will keep a close eye on HMRC.

Presumably this all comes out correctly (albeit in arrears) through the tax return - or have I missed something there?

HMRC is adamant that the system now works; anecdotally, lots still fall through the cracks. Keep a beady eye on Mrs Noise's tax codes, make sure that you have a watertight audit trail in the event of making a case against them. It makes it much easier to get your money back if you have told them time, time and time again that you volunteer the right information at every turn.

I'm seeing my accountant this morning, HMRC owes me just under £800 and has done for nearly a year. I can't claim compensation because I have not suffered actual financial loss (bizarre, I know) unless my accountant does the work and invoices me. It's ok though - you only have cause to worry this month and be under the spotlight if you like nags.

HMRC turns attention to horsebox owners in evasion clampdown - 06 Jan 2015 - Accountancy Age

Currently taking HMRC to the Adjudicator for exactly this problem. Over 4 tax years and 2 interim jobs, they have failed to put pension and salary information together and recoup tax on the element of income that fell into the higher tax bracket. This has led to over £7k in underpaid tax, despite full disclosure at the start of each job. Made a claim under ESC A19 which has been flatly rejected several times. The Adjudicator is snowed under atm and estimates it will be several months to come to a decision.

In the meantime the frequent switcheroony of my personal allowance from pension to salary and back again will no doubt continue.

Perseverance is the key, along with an evidential document trail (and a bit of knowledgeable outside help does not go amiss). I was in a similar situation in February last year; a situation partly engendered by HMRC lack of willingness to admit that their procedures were not joined up (we would probably call it incompetence), and partly by three geographically separated tax offices (mot only geographically, they just don't talk to one another.

Here are a couple of letters to Jessica Gorst-Williams of the Daily Telegraph personal finance section (Saturday DT), following a year of fruitless and frustrating correspondence with HMRC (they might look a bit lengthy, but stick with it, the result is worth it):


Dear Jessica

Underpaid Tax Refund Article – Jessica Investigates, DT 22 February 2014

I could almost use Peter Patton’s letter (Your Money, 22 February) as a template, so similar are our experiences dealing with HMRC. Could I therefore ask that you please give my case some consideration; I have attached a sheaf of what I hope is the relevant documentation to support my position.

In February 2013 I received a P800 demand for repayment of tax underpaid in TY 2009-10; the amount underpaid was stated as £4639.40, as the result of application of incorrect tax codes.

From the leading article on page one of Your Money, three conditions need to be met for HMRC to pursue recovery action; in reverse order:

The notification period of 12 months from the end of the tax year in question, 6 April 2010, was exceeded – the P800 demand was issued on 10 February 2013;

There existed a reasonable belief on my part that my tax affairs were in order as a salaried person subject to PAYE tax coding, and with no previous queries from HMRC during the preceding 12 years’ employment with the same employer;

HMRC had sufficient information on an ongoing basis of income information from my employer to enable implementation of the appropriate tax code – this was identified by HMRC themselves by issue of a tax coding notice on 1 March 2010 to my employer to use Code D0 for the remainder of TY 2009-10. Additionally, they had also issued a D0 notice of coding on 10 January 2010 for TY 2010-11. There were many other contradictory notices of coding that reinforce your observation that the nuances of the tax codes are not necessarily familiar to lay people, which most of us are.

I contested the claim for repayment of underpaid tax (6 March 2013), generating a non-virtuous circle of correspondence restating my and HMRC’s relative positions and assertions. This culminated in instigation of the HMRC complaints procedure (4 September 2013), which resulted in a lengthy and convoluted reply and. to me, largely incomprehensible logic. A further HMRC P800 claim dated 27 August 2013 also slipped in the underpaid tax from 2009-10 as an underpayment in TY 2012-13, this time with a small adjustment down of the sum owed to £4223.66.

I admit at this stage that I could see no way of breaking the circle of counter-claims, and given that I was on a slow upward recovery slope from three operations in December 2012 to remove bowel cancer, along with 6 months subsequent chemotherapy, beginning in March 2013, I had somewhat lost the impetus to continue flogging a dead horse. I therefore acquiesced and arranged for the longest period of recovery (of my money) to be instigated with effect from 1 January 2014.

However, I am pleased to report that I am now well on the way to a full recovery, and reinvigorated by your article on the potential to reverse the HMRC position. I do hope that you are able to exert your expertise on HMRC to the same effect as you have recently for other readers.


Dear Jessica

Underpaid Tax Refund Article – Jessica Investigates, DT 22 February 2014

I am pleased to report that HMRC have responded favourably to whatever arguments you presented to them.

I replied today to a telephone message (28 March – HMRC Complaints Office) and was informed by HMRC that my case has been reviewed, resulting in the application of Extra Statutory Concession ESC A19 annulling the P800 claim for £4639.40. I received a cheque from HMRC yesterday refunding the three monthly payments already made, and was told that the standing order for further payments has been cancelled. In addition, HMRC will send me a cheque for £150 in acknowledgement of the stress and anxiety that their actions have caused. A detailed letter is on the way from HMRC; I can send you a copy (or synopsis) if it helps round off the sequence of actions.

I would like to express my sincere thanks to you for taking up my cause to such good effect; I really am most grateful for your successful intervention.

It can be done

Mister B

Further to my previous, here is the source material for disputing HMRC claims (amazing what stuff people keep in their archives - just have to remember where you put it):

http://webarchive.nationalarchives.gov.uk/+/http://www.hmrc.gov.uk/esc/esc.htm



HMRC delays in using information
If you think that HM Revenue & Customs (HMRC) should have already collected the tax due in your Tax Calculation (P800) because the information had already been provided to it and HMRC have failed or delayed to use this information, then in some limited circumstances HMRC may agree not to collect it.

An 'Extra Statutory Concession' (ESC A19) allows HMRC to do this and it only applies to individual taxpayers who owe Income Tax and Capital Gains Tax. It does not apply in any other circumstances where amounts owing to HMRC are in dispute.

The circumstances are that HMRC should have used the information provided within 12 months after the end of the tax year in which it is received to notify the taxpayer of any arrears.

Time limits
The time limit which applies for ESC A19 is where HMRC have failed to use information received about a source of income, within 12 months after the end of the tax year in which the information is received.

For example: on 1 August 2007 HMRC received information about commencement of a new pension in tax year 2007-08 and the end of that tax year is 5 April 2008. HMRC should have either issued a tax code or sent a tax calculation for the above receipt of information before 5 April 2009, which is 12 months after the last day of the tax year 2007-08.

The same time limits apply for any over-repayment of tax that is made in error and HMRC asks for the tax to be paid back.

If no information has been received then ESC A19 cannot be considered.

Reasonable belief that your tax affairs were in order
HMRC will consider the facts and circumstances of any claim that this concession should apply and decide whether it was reasonable for you to believe (prior to receiving the Tax Calculation) that your tax affairs were in order.

In my case HMRC came back with wholly contradictory (to these criteria) replies. As I said, perseverance and a little outside help...

Mister B

and I thought it was just me.....
 

Retired early 2011, personal allowance applied to pension income. Took up part time employment Sep 2011. Stupidly didn't cotton on straight away that personal allowance was also being applied to that income. I did realise this wasn't right and called HMRC to point it out. 'Pension? what pension? the income from that has been removed from the system' (or words to that effect)

Apparently the fact I had been receiving a pension had been somehow erased as if I had changed employment rather than started something in parallel.
They sent me a demand for the £2500ish underpayment which I am now paying back on a monthly basis for the next 3 years.

I know I earned the income and should have been paying the tax on it at the time but I don't understand why I should be held responsible for what seems like someone's incompetence. I suppose it's just as well I told them when I did, a much bigger debt than the one I have now would really be painful, as it is I feel like I am working partially to pay off a tax bill I shouldn't have had in the first place if someone who cannot be held accountable had done their job properly. Don't suppose there is anything I can do about it but just thought I'd put my six penneth in to maybe re-enforce the thread and give those arriving at the same point in their lives more of a heads up that they need to try and understand what might happen.
I always just trusted tax and pay people to do the right thing, still do in a way. What a Plonker!

Perhaps there is something here that the people who run the financial briefing prior to leaving the service should take note of. Fortunately I kept the tax people well up to speed on my income and affairs and managed to mitigate some of the financial cost of having 2 incomes and incorrect personal allowances applied by saving the delta. However, it is evident that the financial advice should include detailed advice on managing both pension and any income earned after resettlement. The session I attended at Tidworth was not particularly memorable I must admit - albeit it was 9 years ago and my memory aint that good any more ;)