Tax doesn't have to be taxing my arse

I thought I’d share a little tax conundrum I’ve had for the past 7 years. It’s a ripping yarn if you can spare a few minutes and I’ll try and make it as jargon-free and entertaining as possible, given such a tedious subject.

See, when I joined my current employer I enrolled in the company medical scheme because it seemed like a good idea at the time. It attracts a tax penalty of about £1000 a year because it’s a benefit the company pays on my behalf: fair enough. So each year I receive a tax code lower than people without medical insurance. In return my employer completes a form called a P11D stating that I receive this benefit.

Thus for four years I was on a lower tax code — I presumed because of this benefit. I never received any confirmation of this to my home address, but being tax naïve I left it to the professionals to handle and trusted they could work it all out.

That was my first mistake.

We know where you live

One day in 2007 my employer received a tax code notification amendment that was significantly lower than had been applied previously. In fact, it was £4000 lower and I was asked if this was correct. I phoned the tax office and asked them to explain it.

Their answer was that I had been receiving medical benefit that I had not declared for 4 years. They had found out about it during a review of their records and were going to penalise me in the coming year for the whole amount I had defrauded.

I asked why they had not notified me in person at my home address. Guess what? “We don’t have your address” was the reply. I challenged this of course. Not only had I lived at the same house for over 8 years, my home address was clearly written on my year-end P60 forms — all of which the government receive. They claimed they never had it and I had to tell them over the phone where I lived.

I then dug out the four P11D forms that had been submitted to them for the past four years and told the lackey on the phone that I was staring at them, so they must have copies. “No, we don’t have those,” I was told. I challenged this and was throroughly entertained by the response:

“They must have got lost in the post, sir.”

Yes, that was the exact quote.

Magic forms

I was also told that I should “just know” (an exact quote) what my tax code is and should have alerted them earlier. Hang on, if they can’t get it right and have inside knowledge of their own convoluted tax system, how am I supposed to figure it out?

To put all the above into perspective, consider this. For four consecutive years:

1. They think I have been defrauding the government to the tune of £1000 a year
2. They never notified me
3. My P11D forms have all gone missing, despite them being posted in the same envelope as everybody else in my office
4. Everybody else’s P11D forms have arrived at the tax office and been processed

I can only assume therefore that they honestly believe my forms have the capability to leap from a sealed envelope in transit and blow away.

Needless to say I cancelled the medical policy there and then, sent every piece of information I had to the Inland Revenue — P11Ds, P60s with my address on, sample payslips, covering letter and notification that I had terminated the medical scheme — and waited. I received a new tax code a few weeks later.

It was lower still.

They told me that even though I’d been underpaying tax and had been using the wrong tax code for three of my four years, it was still too high. I drafted in an accountant to fight the case, but the government would not budge: it was my fault and I was going to pay over the next few years.

We have ways of making you scream

So, fast-forward a few years. For the last two of those years I’ve been paying a significantly lower tax rate than I should, to compensate them for my crime of disclosing paperwork they routinely lost.

In the last few weeks I received a new tax code notification that was £1000 less than I expected. In the “how we calculated this” bit it claims I owe them this sum for… wait for it… a medical benefit paid on my behalf by my employer.

Once again I telephoned their revenue-generating 0845 number to ask why this appeared on my tax coding. I was predictably put on hold and then informed they had no idea because they could see the letter I’d sent them negating the policy.

The lady on the other end of the phone confirmed that not only had the coding been applied for next year’s coding, it had been applied last year… and the year before, during the time in which they were clawing back tax I shouldn’t have owed.

Treble-whammy!

Right said Fred

Based on information I supplied, this lady said she could adjust this year’s tax code and fix next year’s tax code but was unable to do anything about the year before because it would have to go to appeal at a different department. They would decide whether or not I was entitled to drip-feeding of a refund in my paycheques.

I then received two new tax codes the other day. Next year’s is the same as everybody else in the country with no benefits (i.e. no refund applied). This year’s code has been adjusted to remove the £1000 medical benefit… and has been replaced with a line item saying I have underpaid tax by £422 which they are taking off me.

I was straight back on the telephone to them, explaining my confusion. The call centre budgerigar this time was also clueless and “cannot see where this figure comes from”. Apparently, she has to hand it to a — probably altogether different — department to deal with and they are also going to get back to me (probably on the same day that Gordon Brown admits he’s retarded and unfit to run the country).

Needless to say I’m still waiting to hear from the Inland Revenue on both counts and dearly look forward to the next round of Guess The Tax Code.

It’s getting to the stage now where I’m considering writing to them to state I intend to withhold all my tax and use it to make my own charitable contributions to those more needy because, clearly, the government don’t know what the fuck they are doing with it.