Money News

TAX ERROR IN REVENUE’S FAVOUR
HM Revenue & Customs is turning down three out of four people who say they should not have to pay tax they owe simply because the Revenue made a mistake.

Around two million people are being asked to pay tax due for past years because the Revenue failed to get their tax code right. In many cases they should be able to get this tax written off (the technical term is ‘given up’) using an ‘Extra-Statutory Concession’ ESC A19. But out of the 100,000 who have applied only about 25,000 have been successful.

The rest have been sent letters of refusal which do not explain clearly why they have been turned down. And do not set out how they can ask for the decision to be reviewed.

To get the tax given up you must have told the Revenue about every job, pension or other source of income that you have and given any employer the necessary forms such as a P45. You must also have a reasonable belief that your tax affairs were in order. Believing it is not enough; your belief has to be reasonable. Evidence for that might be that you read letters sent to you by HM Revenue & Customs and did not see anything you thought was wrong. Most of us assume the Revenue gets things right.

The final hurdle to jump is that the Revenue did not make use of this information by the end of the tax year after the tax year in which it got the information. So if you told the Revenue about a change in 2008/09 it had to use that information to work out the tax due by the end of 2009/10. So it is now too late for the Revenue to ask for 2008/09 or 2009/10 tax if you fulfil the other conditions. Sometimes it is possible to get later years written off too if they are linked to earlier ones.

If you have applied under ESC A19 and been refused you should write back and ask for your case to be looked at again by a more senior officer. If that still doesn’t work then you can make a formal complaint. Information on how to do that is on the revenue website http://www.hmrc.gov.uk/esc/esc.htm

PROTECTION RACKET
Four major banks and one credit card provider have set aside nearly £6 billion to compensate millions of people who were mis-sold insurance which was supposed to help if they could not afford their loan payments due to illness or redundancy. The High Street banks have now given up their court case to try to avoid liability and admitted that they mis-sold this product widely. The total bill could reach £9 billion which would make it the second biggest mis-selling scandal ever – only pensions mis-selling in the 1990s was bigger.

Payment Protection Insurance (PPI) failed for a number of reasons. It was often sold to people who could not claim because of their circumstances such as age, not being in full time work, or with an existing medical condition. Sometimes it was sold as if it was compulsory and often paid for upfront in a lump sum which was added to the loan – both practices are now banned. The result was that many claims failed and the Competition Commission estimated that lenders made £1.4 billion a year in excess profits.

The banks will all consider complaints back to 2005 and most will consider them earlier than that. Even if you have complained before and been turned down, complain again and if you get nowhere go to the Financial Ombudsman. You can find details of how to complain at www.which.co.uk/ppi. The average payment is around £2750. Do not be tempted to pay a claims company to help you get compensation. They will do no more than you can do yourself and will keep a third or more of your compensation.

SCAM WARNING
I get a lot of letters from readers and although I do read all of them I cannot generally reply personally. But I did immediately respond to a lady in Surrey who wrote to ask about a lottery in Australia. She had been sent a letter asking how she would like to be paid if she won A$4,000,000 in a lottery. Inevitably if she responded more letters would follow asking her for money. She wrote “What I want to know is are they genuine or fake as I have been caught once before with a fraudulent company in Belgium with whom I spent a lot of money.”

Jane (not her real name) was clearly on what is called a ‘warm list’, sometimes unkindly called a ‘suckers list’. People who have been conned before have their names and addresses passed round among crooks who hope to get more money out of them.

Which is why I tried to break the cycle by writing back at once to say “do not send any money to these foreign lotteries. You have lost money once, please do not lose any more.”

LIFE ASSURANCE BOOST
The insurance industry has found a way to speed up the payment from life assurance policies after someone dies. Every year more than 32,000 insured people die but in the past the money would not be paid until probate was granted to make sure that the right person got it. That left the bereaved spouse or partner or other heirs without the money they needed after the death.

But now the Association of British Insurers has worked with the Law Commission to find a way to cut the time to make the payment from an average of four months to just four weeks. In future the insurer will ask the person named on the policy as the beneficiary to make a simple declaration that they will repay the money if there is a problem with the claim. That means the money can be paid before probate is granted.

DON’T TAKE CASH FOR YOUR PENSION
Some companies with good pension schemes are trying to get members – including past and present employees – to take a cash sum to leave the scheme and move their contributions to a personal pension plan instead. But that is almost always a very bad idea. The Government is so concerned that pensions minister Steve Webb has warned he may ban employers from giving incentives to transfer. “People do not understand what they are doing and in many cases are making the wrong choice” he said.

A final salary pension promises an income for life which is a proportion of the salary you earned while at work. That income will rise in line with inflation each year. But a personal pension plan will provide a lump sum at retirement which you use to buy an income for life (called an annuity). That will not be a guaranteed amount and it will be very expensive to ensure it rises each year with inflation.

The Pensions Regulator issued guidance in December that ‘such transfers are not in the members’ interests’ and discouraged trustees from supporting the process when an employer offered them.

So if your employer or ex-employer offers you money to leave your final salary pension scheme it is best to say ‘no thanks.’ More at: http://bit.ly/iKAru6

WINTER FUELLED
People who expect to qualify for the Winter Fuel Payment this coming winter may be disappointed. For the first time you will have to be aged almost 61 to qualify. The age to get the payment is rising with women’s state pension age. And only men or women born on 5 January 1951 or earlier will qualify this winter. Those who qualify for the first time will be almost 61 years old when winter begins on December 22. They will get a tax-free £200 per household. Those born on 26 September 1931 or earlier will get £300 per household. Couples normally get half each and it is not paid to everyone in care homes.

e-mail Paul Lewis on paul@paullewis.co.uk