Ben’s Story: How his terminal cancer diagnosis leads to a tax crisis
This is a shared story from Tax Help for Older People.
After being diagnosed with terminal cancer, Ben tried to get his affairs in order to make things easier for his wife. To clear his debts, he cashed in his pension to obtain a lump sum. But when Ben received a letter from HMRC he was devastated to read that he owed them £54,000.
Ben did not have that kind of money, nor did he have anything he could sell to that value. He was extremely distressed.
Because of the dangers of pension scams and the risk of being exploited, Ben was very wary of who he could turn to for help. He could not risk losing any more money, and leaving his wife with an even heavier burden. Luckily, he found Tax Help for Older People and got in touch.
£54,000 in tax debt and no idea where to turn
After he cashed in his pension, Ben received a tax return from HMRC. He was apprehensive about completing it as he had never needed to do one before. He took his time filling it out and decided to send it back with a letter explaining his circumstances. At this time a query was raised and Ben provided another letter, and as he did not hear from HMRC again he thought the matter had been resolved. Unfortunately, it had not.
Ben’s tax return was fraught with errors which led to a tax liability of £36,000 being generated when his return was processed, and an additional payment on account of £18,000 was requested, bringing his tax bill to £54,000. This number was unsurmountable to Ben, it was gut-wrenching every time he thought about it, and he and his wife spent their precious time together just talking about the problem without any idea of what they could do.
Tax Help volunteer on the case
The case was handed to a long-standing volunteer, Jane, a dedicated chartered accountant and chartered tax adviser, who found time to help Ben during the height of tax season.
Jane spoke with Ben to gain all the information she needed and contacted HMRC’s fast track service. She discovered that the pension lump sums had been recorded as ‘unauthorised withdrawals’ which explained the high tax demand.
Meanwhile, Ben was still receiving letters from HMRC. His PAYE Coding notice had been changed, and more tax was to be deducted from his pensions to pay his liability. On top of this, his total debt had now risen to £58,000, and Ben was extremely worried about seeing bailiffs knocking on his door.
Here is how the case was resolved between Jane and HMRC:
- It was agreed to remove Ben from Self-Assessment for all future years so the payment on account was cancelled.
- Ben was to provide an updated tax return for the year in question, which Jane helped him fill out
- The return was submitted, revealing that Ben was entitled to a tax refund of around £2,500
- Urgent processing was requested, and a pause was put on debt collection proceedings
Setting things straight
When the tax return was processed, HMRC agreed with Jane’s calculation – the demand for £58,000 was cancelled and the tax refund of £2,500 was agreed. Thanks to Jane’s expert help, Ben did not have to deal with a debt he did not owe and could finally sleep at night. Ben put it best himself:
‘Thank you so very much, for your help and the incredible news. My wife was in the room when you called. Your call has lifted an incredible weight from our shoulders. We had done nothing but talk each day at least for half the day about if we could recover from this nightmare, each of us trying to placate the other. My wife saying these letters from HMRC must be a mistake! Me trying in vain, to tell her not to worry. As it was affecting her health as well as my own. Still, I feel in shock now after your phone call.
So, Jane, May I thank you once again for your stopping this nightmare. I will never tire of saying thank you to you and all within your group of marvellous people. My sincere regards and eternal gratitude.’
Jane, the adviser who worked on this case had this to add:
‘I like helping people to navigate the tax system, and I dislike people having to pay too much tax or penalties because the tax system is too difficult to understand. There is a vast number of people who are conscientiously doing their best to meet their tax obligations but need some help. Tax Help provides an essential service for this group of people.
On this case I achieved the best result in my twenty years of volunteering for TOP. The tax issue was relatively easy to resolve, but my main concern was achieving the avoidance of the debt collection procedures.’
Ben’s name has been changed for his privacy, but his story and his words are real. It shows how a misunderstanding of the tax system, and an inability to afford paid advice, can have life-changing consequences for those involved.
If you want to support people like Ben, please consider donating your last hour of pay to the tax charities this Christmas.