I just thought Id run this past the Tax experts on this forum to see what they thought.
I am having some problems with HMRC. I am on a low income, but I manage - I have low bills and low expenses. I have a small occupational pension running that pays me £3650 pa and I get £10,200 pa from rent on a property that I own, and from this year, small amounts of interest from savings accounts probably under £50 pa.
HMRC used to deduct the tax due on all my income, from my pension. They stopped doing this, I asked them to continue, but they said they could not do it because my pension was too small to allow this any more. They said there was a shortfall of £295. Because of this, I told them I would pay this off as and when I could. They said this was OK and I paid £50 towards the shortfall.
In around Jan 2010, I got a statement that said my tax liability was nil, but it didnt mention my £50 payment. So I tried to ring them on and off for several weeks until around March, got no answer, on any of the phone numbers, just music on hold, going to please try again later I didnt pay any more because I didnt know where my £50 had gone to, and I thought I had nil tax liability.
In June 2010, I wrote to them and said I had been trying to speak to them since March and asking where my £50 was. They replied in September 2010 and said I now owe them around £628 (around 2 years back tax + interest) and they had been applying interest to the sum.
They told me I owed them £295 for 2008/09 and £312 (i.e. £362 minus £50) for 2007/08 in back tax, which they had been unable to collect in previous years this was because originally the tax owed was transferred to be collected via your PAYE coding however as you (sic) currently not liable to income tax the amount has been put back into your Self Assessment Account. IIRC, this was the first time they had told me I owed them anything for 2007/08
I phoned them in October 2010 and said it was unfair they were charging me interest on money that I was unaware that was owed, only because they were uncontactable. I was told I could appeal the interest, As far as I can recall, I agreed to put aside £100 per month to repay the £600ish bill by next April. They agreed to this and said they would put the details in the post.
I sent a letter in October 2010 appealing the imposition of interest, saying it was unfair to impose interest on money that they were unable to tell me, was owed.
When I got their details of the £100 pm payment, they sent me 6 payment slips, it seems that they consider that I have agreed to a payment plan which if I do not stick to, they will take further action.
I rang them last week and said I did not agree that I was on a payment plan and said I would stop paying and only re-start paying after they told me why they were charging me interest on money that they had not told me, was outstanding.
I got two letters from them on Friday 04 November, one says that I must pay the arrears of £100 immediately and if I do not keep to the payment plan they will take further action such as taking funds from my bank account, selling my assets at a public auction or registering the debt at county court.
The other letter, the reply to my appeal, says the amounts owed could not be collected via your code as you doe (sic) not pay any tax, because of this the amounts owed were put back into the Self Assessment statement and interest was charged.
Thats it, thats the whole explanation as to why they are charging interest . and interest was charged They did not address the fairness of it or otherwise, at all. The interest on £628 is not a huge sum, I think they want £20 in interest, but it does rankle.
What do you think? Thanks for any advice and sorry for the long post.
I've just had a look at my SA tax return for 08/09 and I actually had a net income of about £100 for that year, I lived partly on my pension which was mostly cancelled out by the expensess on my rental flat, and partly supported by already taxed savings. and tax-credits.
