"Older people want to pay the right amount of tax but
too many pay more than they need to because they do not claim
allowances to which they are entitled and because of errors. By
providing a more coherent service, HMRC could make substantial
savings as the number of enquiries from older people about their
tax affairs would reduce. A win-win situation for
all."
Amyas Morse, head of the National
Audit Office, 23 October 2009
Older people are a growing group for HM Revenue & Customs
and significant numbers pay too much or too little tax, according
to a report released today by the National Audit Office.
Errors occur because many people’s tax affairs become more
complicated when they reach pension age and HMRC’s systems do not
cope well with their multiple sources of income. The NAO estimates
that, by March 2009, as a result of discrepancies between HMRC’s
records and tax deducted by employers and pension providers, some
1.5 million older people had overpaid tax by an average of £171
(£250 million in total), and around 500,000 older people had
underpaid tax by an average of £207 (£100 million in total). These
errors can have a disproportionate effect on older people as their
net average annual income of £16,000 was around 25 per cent below
the national average in 2006-07. The Department expects a new
computer system introduced in June 2009 to reduce the level of
errors.
Older people may also be paying more tax because they do not
claim additional age-related tax allowances. The NAO estimates that
some 3.2 million older people do not claim the additional
allowances. Some may not claim these allowances because they do not
have sufficient income to pay tax, while others do not realise they
are entitled to them. Claiming these allowances would boost the
average income of an older person by up to 4 per cent. HMRC
estimates that some 2.4 million older people have also paid around
£200 million more in tax because they did not have their savings
income paid gross.
Around 80 per cent of older people dealing with the Department
were satisfied with the service received. Older people are less
likely to contact HMRC for help than other taxpayers, even though
around 36 per cent do not understand their tax obligations
(compared with 26 per cent of all taxpayers). When older people
contact the Department, the NAO estimates each enquiry costs twice
as much to deal with as enquiries from other taxpayers because they
tend to be more complicated. HMRC spends around £36 million per
year in staff costs on dealing with enquiries from older
people.
Demographic changes are likely to increase the pressures and
costs for HMRC. The Department should rethink its approach to
ensure that older people get the financial support to which they
are entitled. It should also work in a more joined-up way with
other organisations to provide a more coherent service for older
people on their tax affairs.
Publication details:
HC: 961, 2008-09
ISBN: 9780102963212