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Pensions hit by new tax bungle: Millions pay price as taxman 'loses' £1.2bn

Watchman

Alfrescian
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Pensions hit by new tax bungle:
Millions pay price as taxman 'loses' £1.2bn


By James Coney
Last updated at 10:59 PM on 25th January 2011

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Millions risk being robbed of their state pension because they have not been credited with paying £1.2billion in National Insurance.

Shock figures last night revealed up to two million workers a year who faithfully paid their tax bills have not been matched with their NI contributions.

The scandal is the latest to involve Her Majesty’s Revenue and Customs – still reeling from last year’s crisis which left millions paying the wrong amount in tax.
Robbed: Millions face losing their state pensions because they have not been credited with paying National Insurance contributions - and would have to prove they worked to claim

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Robbed: Millions face losing their state pensions because they have not been credited with paying National Insurance contributions - and would have to prove they worked to claim

Between 2004 and 2009, some 9.3million NI payments have not been matched to worker records.

The precise number of victims is unknown but it is clear that many millions have unwittingly not been credited for tax they handed over.

These mistakes could jeopardise their right to claim a full basic state pension, currently £97.65 a week. A full pension is given only to those who have paid NI for at least 30 years.

Anyone who comes up short would have to dig out old tax records, or contact their employer to prove they worked during the missing years. But these employers may have gone bust, been taken over or destroyed the records.

This fiasco revolves around form P14, which employers have to complete and send to HMRC every year. This shows how much money they have docked from each employee for National Insurance contributions.

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HMRC checks this information against the tax it has received. However, in some cases the records are wrong – usually because a person’s name and address does not match their national insurance number.

When this happens, HMRC is supposed to contact the employer to get them to correct the mistake.

But figures revealed by Conservative MP Ian Liddell-Grainger, chairman of the All Party Parliamentary Group on Taxation, show that more than nine million of these records have still not been put right.

The figures reveal that from the 2004-2005 tax year more than 1.8million National Insurance payments have still not been credited to a worker’s records.

In 2005-2006 more than 2million tax payments are in limbo. For 2006-2007 there are 2million unmatched records and for 2007-2008 there are 1.9million still not correct.

Latest available figures from 2008-2009 show 1.5million records from that year have still not been matched up.
Millions of works who have paid NI have not been awarded a credit so risk losing part of their state pension


It is not clear who is to blame for the original mistakes.

Particularly at risk is anyone who retired before last April. At that time, only those with 44 years of contributions could claim a full state pension – and those with fewer than ten years got nothing.

Mike Warburton, of accountants Grant Thornton, said: ‘These people could have a great big gaping hole in their state pension without even knowing about it. It could prove catastrophic for these individuals.

‘It’s likely they will find out about it several years down the line when they may have no way of proving they worked in that year.’

Mr Liddell-Grainger said: ‘We simply do not know how serious this problem is – it could date back many years.

‘HMRC have to act now to ensure that these records are matched up as soon as possible.

‘There are people who could hit 65 years old before they realise they have a problem. It may be too late for them to act.’ Everyone’s right to a basic state pension depends on paying National Insurance contributions.

Anyone who retired before April this year has to have 44 years contributions if they are a man, and 39 for a woman.
Catastrophic: Accountant Mike Warburton has warned that people could have a huge hole in their pension without even knowing it

Catastrophic: Accountant Mike Warburton has warned that people could have a huge hole in their pension without even knowing it

Those who have retired, or will do so after last April will need at least 30 years of contributions.

For every year they miss their pension will be slowly whittled away. Every missing year costs a pensioner £3.25 a week.

So someone with five years of missing contributions would only get a pension of £81.40 a week.

The fear is that in some cases a worker could go years without realising that an error had been made.

‘The mistake could even be passed from job to job.

Matt Boyle, of journal Payroll World, said: ‘It is no good HMRC placing the blame on employers for this.

‘HMRC has proved time and again that their record keeping is not good enough. Despite knowing about the problem for six years it has failed to match up all these records. It is vital they sort out this mess so give peace of mind to millions of workers.’

The NI nightmare is the latest in a series of problems to have beset the taxman.
Last February HMRC caused chaos when it changed computer systems and thousands of taxpayers were bombarded with different tax codes.

Then, in September, it was forced to admit that 5.7million people had paid the wrong tax. Of these, some 1.4million face bills of an average £1,428.

The taxman is also trying to correct more than 17million records where someone may have either overpaid or underpaid tax.

HMRC claimed it has a team of experts trying to clear the tax mistakes.

A spokesman said: ‘HMRC receive end of year information from employers on National Insurance contributions that cannot be matched to the correct employee record.

‘We make every effort to match these records, however, where that’s not possible, contributions are retained until such time as they can be matched.’

Read more: http://www.dailymail.co.uk/news/art...g-1-2bn-national-insurance.html#ixzz1C6C0FQH2
 
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