Supplementary memorandum submitted by
the Low Incomes Tax Reform Group
The LITRG have provided the following comments
on the oral evidence given by HM Revenue and Customs. The comments
relate to questions 75, 77 and 91.
QUESTION 75
In effect Mr Gray states that three years liability
on this unknown amount will be collected in one tax year (2009-10)
and pensioners may not be told about it until close to the start
of that year. That is not normal for people on very low incomes.
HMRC should, at the very least, have regard to the financial capabilities
and the personal circumstances of each of these pensioners and
undertake liaison with the relevant DWP/Local authority colleagues.
Armed with this information a customer-focused response can be
taken.
QUESTION 77
We did not ask that the HMRC action should be
to obtain the information in the current year. We merely anticipated
that HMRC would say that they were powerless to do anything about
it. This would not have been correct as it is merely reflects
how many resources HMRC were prepared to put into the problem
in the current year.
The Low Incomes Tax Reform Group asked to see
the legal advice which Mr Shipp mentions but this request was
denied. We assume because they were not confident that it would
hold up to scrutiny.
Mr Shipp refers to wanting to be even-handed
to pensioners. If HMRC are going to let the debt accumulate that
is not being even-handed to those pensioners who are going to
be thrown into debt.
We do not believe that HMRC will get simple
processes in place before next year between themselves and the
DWP to deal with the knock-on effects of these errors.
Firstly the DWP operate strict backdating rules
and we do not believe that these will be set totally aside for
this cohort of HMRC customers.
Secondly when Pension Credit was introduced
in 2003 it was accompanied by the introduction of Assessed Income
Periods, being five years of fixed awards. These expire next year
and the DWP are gearing up to ask pensioners if anything has changed
in their financial situation, so new fixed awards may be given.
It will be a lottery whether pensioners will have heard from HMRC
or not by the time the DWP write to these pensioners.
Finally we are not convinced that HMRC are being
even-handed or fair to this low-income pensioner population when
we have numerous examples of tax credit debt being written off
of much greater magnitude than is likely to occur here. Tax credit
claimants have longer periods ahead of them to recover the lost
finances and the ability to work to replace the debt. These, often
very elderly, pensioners will not have that opportunity. What
is fair about that?
I think HMRC should be asked how many P14s they
have already received from pension providers which are sitting
in their "residual files" (a large electronic in-tray)
and which therefore disclose the amounts already paid to pensioners
for 2006-07. This would obviate the need to "trouble"
the pension providers if the reality is that HMRC have nearly
all of this information already as to who these people are and
the pensions paid are not going to vary significantly or at all
between years.
QUESTION 91
It is not correct to say that this problem was
identified in 2007-08 as was shown in the NAO Report it was identified
in April 2005. LITRG was aware of it in 2005.
This whole exercise will require hundreds of
HMRC staff to be involved with knock-on effects across to other
government departments and the already over-stretched voluntary
sector. Bearing in mind the associated distress to low income
pensioners, many of whom after examination will be shown not be
taxpayers, we cannot accept that this is a good use of HMRC's
scarce resources.
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