Questions of Cash: Taxman's right even when he's wrong

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The Independent Online

Q In June, I submitted my tax return for the 2002-03 year. After five months of regular complaints about the delay, I received £635 for overpaid tax. Now the Inland Revenue has written saying it has miscalculated and I must repay £80. It has given no explanation and demanded payment within one month. NS, by e-mail.

Sandra Smith, of HRS Taxation Services says your situation is not uncommon. "The Inland Revenue have been dealing with tax credit applications for the first part of the new tax year and it would appear self-assessment returns were not dealt with," she says.

"It is taking several months for returns to be dealt with and the backlog appears to be growing. The Inland Revenue don't always get it right. I understand they aim to achieve a 95 per cent success rate, but they have a 25 per cent failure rate for the 2001-02 tax year, so one in four tax returns were calculated incorrectly.

"They are, unfortunately, within their rights to ask for a refund of any amount overpaid incorrectly and will charge interest if they do not receive a timely response. Your reader may wish to make a complaint to the area officer, but this may result only in an apology."

Q I shall shortly inherit a legacy of $120,000 (£68,000) from the US, to be paid in two stages as dollar cheques. Should I pay them into my current account in the UK at the present exchange rate and suffer the charges, or open a dollar account using the cheques and wait for the dollar to recover, or take another course of action? RMH, Exeter.

Several banks have private banking divisions which may assist you. Citibank suggests you open a US dollar Account with Citibank in the UK, deposit the cheque at no fee and wait for the exchange rate to recover. A Citibank spokeswoman says: "After the exchange rate has moved, the customer has a choice of making the transfer instantly online, or through our CitiPhone banking service. For transaction sizes of this amount, there will be a preferential rate."

Q I took out a Norwich Union endowment on 4 August, 1988. We believe this was mis-sold, but the IFA which sold it has gone out of business and the Financial Services Authority and the Financial Services Compensation Scheme says they cannot help.

Apparently, our policy pre-dates the legislation which would have protected us. The surrender value on our policy is £4,614, compared with £5,429 which we have paid in and £4,144 of received bonuses. This seems unbelievable. We tried to make the policy paid-up, but were told because it post-dates February, 1988, the law prevents us from doing this. We no longer need the policy, but it seems we are trapped into paying into it for 10 more years. MG, Chesterfield.

The stronger protection, to which you refer, came into force on 28 August, 1988. If you had bought your policy a few days later you would have a good chance of obtaining compensation for mis-selling, but as it is there is no apparent means of redress.

Your route out your unwanted endowment may be to sell it, but Colin Jackson of Baronworth, which specialises in selling endowments, says there is no market for Norwich Union policies. Should you wish you might check on the market on an annual or half-yearly basis, until it picks up and enables you to sell your policy for a reasonable price.

Q My late mother left money to each of my children in her will, of which I do not have a copy. The solicitor has messed around for 18 months failing to administer the will. Now he says he is holding the money in trust for the children until they are 18. The trustees are himself and my father. Must the money be held in trust, has the solicitor to choose the investments and could my wife and myself not be the trustees? JB, Bristol

Stephen Pallister, a partner in the private capital group at solicitors Charles Russell, says: "Your first step is to ask the solicitor for a copy of the will. The executors are obliged to let you see a copy. You might also see a solicitor yourself to understand the effects of the provisions.

If the will specifies the money is left to your children at 18, it must be held in trust until then. If the legacy is to them outright, the executors may chose (but are not obliged) to hand the money to you or your wife, if there is a clause in the will allowing you or your wife to give a valid receipt on your children's behalf.

If there is no receipt clause and/or the legacy is conditional on your children reaching 18, the trustees must look after the money in trust until then. Best thing would be to ask the solicitor and your father to appoint you and your wife as trustees. You could then invest the money within the trust or apply funds for the children's benefit."

Q I arranged a mortgage through Abbey and asked for the survey to be upgraded to a homebuyers' report in mid October. Because of confusions between the other parties, my survey has been delayed by more than a month. I have been consistently given wrong information by Abbey which led to further delays. The exchange of contracts is now held up. AJ, by e-mail.

Abbey accepts it was partially responsible for the survey delay and in not returning your calls. It is reimbursing your £500 survey costs.

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