Pensioners - the taxman is targeting you!

A new report reveals the taxman is targeting the vulnerable for missing tax payments.

Trust in the taxman has rarely been so low, with 2010 seeing a series of serious mistakes being made.

However, perhaps the most damning slight against the taxman comes from a new report from the Adjudicator’s Office, the body overseeing the taxman’s conduct, which has raised concerns over the way HMRC has targeted and treated certain sections of society.

The Adjudicator

The Adjudicator’s Office acts, in its own words, as a ‘fair and unbiased referee’ looking into complaints against HM Revenue & Customs, the Valuation Office Agency and the Insolvency Service.

And in its annual report for 2010, it raised some pretty worrying points against the behaviour of the taxman.

Targeting the vulnerable

Here’s what the report says: “In recent years we have seen a growth in cases where HMRC’s decision making has had an adverse impact on vulnerable groups of people, for example pensioners facing unexpected tax bills.”

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Indeed, in the foreward to the report, the Judy Clements, the Adjudicator, admits both she and the Parliamentary and Health Service Ombudsman shared “serious concerns” over the situation.

The Adjudicator made clear that it wasn’t happy with the way such cases were handled, to the point that specialist investigators from the Adjudicator’s office were sent to lead a workshop for HMRC staff, to improve how they deal with the taxpayers it has targeted for payments. Reading the case studies provided by the adjudicator, it is little wonder they need to improve their processes.

In the wrong

The Adjudicator highlighted a number of case studies to demonstrate the sort of cases she has had to oversee over the past year, and they make for pretty grim reading.

In the first, one retired civil servant had underpaid tax over the course of several years due to an administrative error on the part of HMRC, despite the fact that the pensioner had contacted HMRC twice to inform them they had made a mistake.

Despite accepting they had made mistakes, the taxman still pursued the pensioner for extra tax. The taxman’s case was dismissed, and they were ordered to pay compensation on top.

In a second case, a pensioner was pursued for underpayment of tax, again not something that he was at fault for, because the taxman believed he “should have known his tax affairs were not in order”, an argument that the Adjudicator acknowledges somewhat overstates the likely tax knowledge of the person involved.

There was even discussion of the taxman chasing up supposedly missing payments, which had already been made years beforehand.

In total, the taxman was ordered to hand over more than £100,000 in compensation back to those taxpayers who had been treated poorly over the year.

A poor year for the taxman

The idea that the taxman has targeted vulnerable people, who are perhaps not completely secure in their understanding of the tax system, leaves a nasty taste in the mouth.

What’s more, it just adds to the general distrust of the system. It has been a very grim year for the taxman. At the start of the year, we had the tax code mix up, when a significant proportion of the 25 million tax code notices sent out contained incorrect codes.

It has since emerged that six million taxpayers will receive letters before Christmas from HMRC asking for an average of £1,400 in underpayments, yet again due to an administrative error by the taxman, rather than an error by the taxpayers involved.

And now an internal review by HMRC has revealed that of the 45 million employment records the taxman holds, one in five may contain mistakes.

Tax apathy

Sadly, many of us may be losing out on some significant sums of cash due to our own ignorance towards the tax process.

A survey by HSBC recently found that more than half of us have no idea what our tax code is, while a third have never even looked at our P60s! Indeed, even basic tax knowledge, such as when the various tax bands apply seems to be beyond us – 81% of respondents did not know at what point the 40% tax band applies, while more than half are in the dark as to how much we can earn before we start paying tax.

Paying the right tax

Clearly, relying on HMRC to get it right is asking a bit much, so it’s extra important for all of us to resist being completely apathetic towards the world of tax, and instead ensure that we don’t end up forking out more than we need to.

The first thing to do is ensure you have the right tax code.

There’s a decent explanation of how tax codes work in Claim £1,300 of your tax back, while it’s also worth a read of the HMRC’s breakdown of taxcodes. If you then believe the code is wrong, you’ll need to contact your tax office.

Complain!

Should you feel unhappy about the way HMRC has treated you – perhaps because they are targeting you for a supposed underpayment – then don’t just accept it, complain!

You’ll need to contact the complaints manager at the relevant tax office, providing details such as your National Insurance number and the last reference number the taxman used when contacting you. You will need to detail not just what you believe the taxman has done wrong, but also what they should do to put it right.

HMRC should then respond within 15 days.

If you aren’t happy with the response you get, you can then ask for a senior officer (who has not previously been involved) to take a fresh look and make a final judgement.

If you’re still unhappy, then it’s time to turn to the Adjudicator. Head over to the Adjudicator’s website, where there are full details on how to raise your case with them.

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