Pensioner paid too much tax and HMRC refused to refund it

What happened

Mr D was entitled to an age-related allowance but this was not added to his pension's tax code, meaning that he paid more tax than he needed to.

After Mr D's death, his son Mr C, who was the executor of his estate, found out about the overpayment. He asked HM Revenue & Customs (HMRC) to refund it to Mr D's estate. HMRC refunded the tax overpaid for the previous five years in line with tax law's statutory deadline for overpayment claims. However, it said it could not refund most of the overpayment, which was before that time, because the claim was out of time.

Mr C asked HMRC to decide whether it had made an error that caused the overpayment and to consider repaying earlier years' tax. He felt that if HMRC had caused the overpayment, it would be able to consider refunding the tax overpaid. HMRC said that it had no evidence it had made an error and therefore it could not refund the remaining overpaid tax. It also said that, in order to add age-related allowances to a taxpayer's pension code, the taxpayer must make a claim for it. This is because HMRC does not add those allowances automatically unless asked to do so. It also has no legal obligation to do so.

What we found

We did not uphold this complaint. HMRC's explanation and decision about the overpayment were correct. There was no evidence that Mr D had made a claim for age-related allowances or returned a pension form while he was alive. Because of the passage of time and HMRC's data retention policy, it was now impossible for us to say that HMRC had made an error that caused the overpayment. We concluded that, without evidence of error by HMRC, it was correct to say that the tax law must prevail and the refund could not be given.

HMRC's complaint handler, the Adjudicator's Office, had investigated the complaint before us. The Adjudicator found that, although HMRC's decision had been correct, it had not handled Mr C's enquiries well. HMRC had delayed responding to him and had sent confusing letters that made the issue drag on for an unnecessary length of time and caused distress. The Adjudicator recommended that HMRC apologise to Mr C and pay him a £125 consolatory payment. We agreed with this recommendation and considered that it was in line with what we would have recommended. We therefore had no grounds to make further recommendations.