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1.5 million pensioners overpay tax

The National Audit Office (NAO) today published a damning report on the performance of HMRC in assessing the 5.6 million older people who pay tax. They estimate that 1.5 million pensioners are overcharged by HMRC.This is no surprise to LITRG and we have written three reports in the last 12 years identifying all the causes. In that time HMRC have only paid lip service to correcting the fundamental faults in their service strategy.

Today, the NAO published their report HM Revenue & Customs: Dealing with tax obligations of older people. It is not often that we can heartily endorse almost every word in a NAO report, but this is an exception. It is well-researched and provides key insights into the reasons why HMRC do not give an adequate service to their older customers.

Key findings

In their report the NAO found that:

  • Many older people pay more tax than they need to and 1.5 million pensioners overpay an estimated £171 per person on average
  • Older people comply with their responsibilities more diligently than other groups of taxpayers and on average underpay significantly less tax
  • The reason for many underpayments by pensioners is HMRC’s failure to make proper and timely use of information in their possession
  • The tax affairs of pensioners are more complex than younger groups and it costs HMRC around twice as much as other groups to deal with their queries
  • Thirty-six percent of pensioners do not understand their tax obligations
  • Simplifying the processes for pensioners would save HMRC significant sums of money
  • Older people are more likely to suffer from HMRC errors than other segments of the population

Recommendations

There is a remarkable similarity between the recommendations contained in our 2007 report and this latest NAO report:

  • More and better liaison between HMRC and the DWP
  • Ensuring older people get the financial support to which they are entitled
  • Reviewing the complex age-related allowance structures
  • Awarding the age-related allowance automatically without the need for a claim
  • Improving the take-up of Blind Person’s Allowance by data matching with local authorities
  • Obtaining the banks’ co-operation in ensuring that tax is not withheld inappropriately from interest paid
  • Considering centralising the tax affairs of pensioners so as to get the benefit of staff specialisation
  • Exploring the possibility of the DWP operating PAYE on the State Pension for selected pensioners so taking them out of the Self Assessment system
  • Providing a single notification which explains how HMRC have allocated allowances against several PAYE sources
  • Getting HMRC to participate in “one stop” local advice centres to benefit older people
  • Working with the Department of Health and local authorities to provide better information and services for those older people who employ personal carers

The way forward

The NAO have shown that an investment in changing processes now will pay greater dividends later and support the wider government strategy as expressed in Building a society for all ages. We have spent over 10 years in campaigning to see many of the changes now proposed and hope that the government (and HMRC) will grasp this opportunity to make a significant change for the benefit of older people.

Anyone promising these improvements would, we are sure, get the appreciation of the older electorate.

(23-10-2009)

Contact: John Andrews (0844 579 6700 Fax 0844 579 6701)

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