No offset permitted

The taxpayer filed his 2009/10 self assessment return by the deadline. Tax of £1 842 was due. Before submitting his return he informed HMRC he was no longer working for his employer and his civil service pension was being taxed using a DO code.

He asked the Revenue to amend his 2010/11 code for his pension so that it took into account his personal allowances.

The taxpayer received a refund of £3 865 for the overpaid tax on his civil service pension for 2010/11. He then sent a cheque for £1 842 to the Revenue which imposed a surcharge for late payment of 2009/10 tax.

The taxpayer appealed.

HMRC said the overpaid tax for 2010/11 was not relevant to the 2009/10 tax due on 31 January 2010. The legislation did not permit the department to offset overpaid PAYE tax against a self assessment liability for an earlier year...