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archived case summaries
We continue to receive a high proportion of complaints about the difficulties that people sometimes experience with their tax codes in general and, more specifically, tax underpaid as a result of incorrect tax codes being applied to earnings.
A recurring feature of such cases is HMRC's application of their Extra Statutory Concession A19 (ESC A19), which, in certain circumstances allows them to give up arrears of tax. The following case summaries illustrate typical issues that arise in such investigations.
ESC A19 case summary 1
Miss G retired early from work due to ill health and began to receive an occupational pension. She was subsequently able to resume work on a part time basis. She advised the Inland Revenue of her income and that she expected to draw her state retirement pension the following year, when she reached the age of 60.
Miss G's income from her employer's pension and part-time work was taxed correctly but the Inland Revenue failed to adjust Miss G's tax code when she began to receive her retirement pension. The situation was not rectified and her arrears built up over 5 years.
During this time, Miss G did not receive any tax codes and she continued to believe that all of her income was being taxed through PAYE. When she was finally advised that considerable arrears had accrued, Miss G was, understandably, very upset. She asked the Inland Revenue to give up her tax arrears under ESC A19.
The Inland Revenue accepted that they had received information from the Department for Work and Pensions (DWP) about Miss G's state retirement pension and that they had failed more than once to act upon this information. They did not, however, accept that Miss G could have reasonably believed that her tax affairs were in order. They said that she should have expected to pay more tax when her income increased. This upset Miss G even more, as she believed that the Inland Revenue was questioning her integrity.
The Inland Revenue offered to collect the arrears, which amounted to approximately £5,000, by restrictions to her tax code over 5 years. They also offered to pay Miss G £100 in recognition of the worry and distress that she suffered because of their mistake. Miss G was not satisfied with the Inland Revenue's offer and she asked the Adjudicator to consider her case.
We upheld this complaint.
We took the view that Miss G's tax affairs were not entirely straightforward. We considered that her age and ill health meant that she was vulnerable and that the Inland Revenue should take account of this when considering her case. During our conversations with Miss G, it was apparent that she had genuinely believed that her affairs were in order and the arrears that accrued had caused her considerable worry and distress.
Miss G did not receive any tax codes throughout the 5 years when the arrears built up. We felt that these might have alerted her to the fact that she was not paying sufficient tax and, on that basis we felt that she satisfied the conditions set out in the 'reasonable belief' test. As the Inland Revenue had already accepted that they failed to make proper and timely use of information from the DWP, we asked them to reconsider their position concerning 'reasonable belief'.
The Inland Revenue subsequently agreed to give up the arrears of tax, which totalled nearly £5,000, under the provisions of ESC A19.
