Today, not long after thousands of pensioners with retirement annuities received incorrect PAYE codes, it is revealed that some 600,000 pensioners have had wrong amounts of tax collected from their pensions for many years.
The new Financial Secretary to the Treasury (Jane Kennedy) got off to a difficult start last week by announcing further problems identified with the tax credits system in the years 2003-04 to 2005-06. However it appears as if HMRC are going to take these mistakes on the chin and not seek recovery from claimants.
Every spring most householders receive a council tax demand – invariably higher than last year’s. The amount to be paid depends on the value of the property, not the income of the householders, and many people struggle to pay. But the consequences of getting behind with the payments can be very unpleasant.
Pensioners on low incomes do not receive the help from HM Revenue & Customs that they deserve and as a consequence too many mistakes are made which mean that they pay too much tax. A new, comprehensive, report from the Low Incomes Tax Reform Group sets out a range of improvements which the incoming Prime Minister would be well advised to embrace.
For years HMRC and its predecessor organisations have admitted that they really ought to do better at handling the complaints of its customers. So it is doubly disappointing that the new HMRC have not yet been able to build upon even their own best practice as they introduce a new approach to complaints.
Pensioners who have deferred their State Pension in order to receive a lump sum will have some serious thinking to do after the tax changes announced in the Budget. It was thought that pensioners of 65 or over could not be worse off than in the current tax year by the Chancellor raising allowances from April 2008 whilst removing the 10% lower rate tax band. This is not so.
In an unprecedented move HMRC has announced a deal for people who have offshore bank accounts and who may not have disclosed everything that they ought to the tax authorities. Rather less publicity has been given to a parallel deal for anybody with something to confess to the tax authorities not connected to offshore accounts (the “onshore deal”).
In November 2006 the rules about what changes of circumstances you must report to the Tax Credit Office changed. From 6th April 2007 the time limit for reporting these changes has reduced from 3 months to 1 month.
Yesterday’s Budget may help some, including low-income families, who are caught by a little-known rule designed to counter inheritance tax avoidance, but which can also catch ordinary family arrangements entered into with no thought of escaping tax.