CIOT: Time limit for reclaiming overpaid tax to be cut
At the moment, if HM Revenue & Customs (HMRC) make mistakes with a taxpayer’s tax affairs then the taxpayer can claim back taxes (with interest added) for the last 6 years. But now HMRC want to change these rules so that they are only liable for 4 years.
HMRC hold a wealth of data about taxpayers on its files, but this is not always married together. When it is married together very often a repayment is shown to be due. This is particularly true with the pensioner population.
John Andrews, Chairman of the Low Incomes Tax Reform Group (LITRG), says: “Low-income taxpayers can pay too much tax for a variety of reasons, including incorrect PAYE codes; additional personal allowances not given, such as age allowance, blind person’s allowance or married couples allowance; or through having 20% tax deducted at source on savings interest, when no tax or 10% tax is actually due.”
HMRC make frequent mistakes when dealing with pensioners. For example, LITRG has come across numerous taxpayers in their 80s who have never had the benefit of age allowances and have therefore been overpaying tax for 15 years or more.
A year ago HMRC estimated that there were 180,000 pensioners who had overpaid tax, yet to our knowledge they have not even started to find out who these people are, let alone make them repayments.
John Andrews adds: “If you have been careless with your tax affairs, HMRC can go after you for 6 years of back tax, but when they are careless with your affairs, they only want you to have the right to 4 years. Where is the fairness?”
This change of law is tucked away in the Finance Bill 2008 and will be debated in the next few weeks.
John Andrews continues: “Until such time as HMRC put their own house in order by matching all data in their possession and contacting taxpayers who are likely to have overpaid, we are strongly against a reduction in the time limit for claims. And so should every MP sitting on the Finance Bill Standing Committee be.”
-ENDS-
For press information contact Simon Goldie on 020 7245 4122 (direct line), 07879 497316 (mobile). Email sgoldie@ciot.org.uk
Notes to Editors
LITRG asked the charity TaxHelp for Older People to undertake a sample of recent tax reclaims for low income pensioners. They analysed 80 of their recent refund claims. This revealed the following:
· 44% are claims for refunds going back 6 years
· All these claims relate to where HMRC failed to advise the pensioner that tax was owing to them
· The average claim is £1,963 for the 6 year period (an average of £327 per annum)
· The highest claim was for £5,200
· The lowest was for £37
· Most claims were in the region of £1,000 to £2,000
These are revealing statistics and show how inequitable it would be for HMRC to remove two years of these repayments.
The Low Incomes Tax Reform Group is an initiative of The Chartered Institute of Taxation which gives a voice to the unrepresented in the tax system.
The LITRG website at www.litrg.org.uk contains much free advice for people on low incomes.
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