Warning over rebates

The time available for claiming a rebate on overpaid tax is to be cut from five to four years, leaving taxpayers unable to reclaim huge amounts they would otherwise be entitled to, an accountancy group has warned.

Pensioners will be among the hardest hit by the decision of HM Revenue & Customs (HMRC) to cut the time limit, warns UHY Hacker Young. The elderly are particularly disadvantaged because many – 200,000 last year, according to HMRC estimates – are paying too much tax on pension annuities due to incorrect PAYE codes.

Under the 2008 Finance Bill currently before Parliament, HMRC will only have to rebate overpaid tax from the past four years. However, it will still be able to demand underpaid tax That goes back longer than four years.

Rob Durrant-Walker of UHY Hacker Young said the system was unfairly weighted in favour of the authorities. "If taxpayers are careless, HMRC can demand back-tax of more than four years. But if HMRC is careless and collects too much tax, taxpayers will only be able to seek redress for four years. It's one rule for HMRC, one rule for the taxpayer."