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A substantial number of taxpayers who receive the state pension have had the wrong PAYE codes issued to them for 2010/11, HMRC have confirmed. This is in addition to the code debacle for earlier years, which hit the headlines last year.
A spokesperson for the Revenue said the state pension has been included in the tax codes for 2011/12, meaning pensioners should be paying the correct amount of tax from April 2011.
Turning to reconciliations for 2010/11, the spokesperson said that, once HMRC receive the information from employers and pension providers (due 19 May 2011), the department will start to reconcile taxpayers’ tax for the year.
The Revenue will send a P800 tax calculation to the pensioners who may have paid too much or too little tax during the year and, ‘as the state pension was not included in the code for that year also for some of these pensioners, some will find they have an underpayment of tax’.
The spokesperson said, ‘To ease the burden of paying back tax owed, we will automatically spread collection of the amount over three years’ tax codes, starting 2012/13’. He added that taxpayers should contact HMRC if they wish to discuss alternative payment options.
The department 'will be as flexible as we can in helping people pay the amount they owe. We realise that a tax bill customers [sic] might not be expecting will be upsetting. We are sorry that some customers [sic] will have to pay more tax than they expected, but we do have a duty to collect this money so are concentrating on making the process as painless as possible for those affected.’
Commenting on the earlier years’ underpayments, the spokesperson said HMRC are 'working through underpayments for 2007/08. Where we have already identified that ESC A19 applies to 2008/09 and 2009/10, and we are satisfied the same conditions apply to 2007/08, we will not issue a P800, but there will be cases where this is not readily apparent or the underpayment may have arisen for another reason. We will issue P800s in those cases, but customers [sic] can still ask for their case to be reviewed for ESC A19 on an individual basis.’
To help prevent similar problems arising in the future, HMRC and the Department for Work and Pensions are looking at how the exchange of information can be improved so that tax codes can be revised to include the state pension when it is first paid.
They have also put in place a dedicated pensioner contact centre.
