I have an elderly client who, many years ago, claimed additional retirement pension in respect of his wife, who was not then working.
In 1989 the wife took up employment and my client, quite innocently, did not inform the Department of Social Security of this fact, and the additional pension continued to be received.
This came to light last year and the Department for Work and Pensions has now determined, after long correspondence, that a substantial amount has now to be repaid. My client has no means of repaying this.
I have an elderly client who, many years ago, claimed additional retirement pension in respect of his wife, who was not then working.
In 1989 the wife took up employment and my client, quite innocently, did not inform the Department of Social Security of this fact, and the additional pension continued to be received.
This came to light last year and the Department for Work and Pensions has now determined, after long correspondence, that a substantial amount has now to be repaid. My client has no means of repaying this.
The calculation is for pension overpaid since 1989 and I am informed that the department can indeed go back more than the six years I expected. It is quite possible also that tax has been paid on this additional pension, but the Revenue will presumably not open years earlier than six years ago, even if the relevant information was available (I have only recently become involved with this client).
Have readers any experience of this situation? In particular:
(1) Can the Department for Work and Pensions make a repayment claim back to 1989?
(2) What can be done about the potential 'penalty' of tax having been paid on pension between 1989 and 1996 that now has to be repaid?
(Query T16,080) - Rosie.
A pensioner is notified of his entitlements yearly by the Benefits Agency on form BR2199. This form asks that, if one gets extra retirement pension for a spouse, relevant particulars of her earnings should be notified. However, this restriction only affects additional pension in the case of a woman under age 60. Evidently, the correspondence should be examined carefully. The problem should not be confused with the availability to a married woman of a basic pension based on her husband's full contributions.
The dilatoriness of the Benefits Agency could warrant a claim pursuant to Article 6(1) of the Human Rights Convention, as discussed in National & Provincial Building Society v United Kingdom [1997] STC 1466 at page 1490, and Eagerpath Ltd v Edwards [2001] STC 26.
The position as regards tax is that, although repayment outside six years is usually refused, that can be a matter of words, as equivalent 'compensation' may be available. An instance was recorded as a 'You Said It!' response to Query T15,489, reported in Taxation, 13 January 2000 at page 307.
This quoted a successful reference to Inland Revenue Extra-statutory Concession B41 which states that repayments of tax will be made in respect of claims for relief outside the statutory time limits (such as section 33, Taxes Management Act 1970) where an overpayment of tax has arisen because of an error by a Government department (not only by the Inland Revenue), where the facts are clear. - M.C.N.
Where there is a right to income that depends on circumstances, it is usually monitored from both sides. On the one hand, the recipient is supposed to declare changes in circumstances; on the other, the easement provider is bound to verify entitlement at intervals. For example:
* Where council tax is paid at 75 per cent in respect of a dwelling with but a single resident, the council seeks a renewed declaration of the number of occupants annually.
* Where a worker in non-pensionable employment runs a personal pension policy, the insurer will police the premium level by requesting renewed proof of income level every few years.
* Income Support benefits are still more frequently audited by the donor authorities.
In an organisation such as the Department of Work and Pensions, whose regulations rival taxation for complexity, it is a given that pension increases based on conditions as changeable as the incidence of employment will be reviewed at least annually, until the employable wife has attained pension age. At this point, the increment to the client's pension would doubtless be replaced by (at least an element of) a pension to his wife. So the department's negligence, in not warning the client to notify changes and in not checking continuity for twelve years, has brought about the present position.
The fact that the discovery was made only last year suggests that it must have come up when the preparatory calculations of the wife's own pension were being made. This suggests that she is at least seventeen years younger than her husband.
It is considered that the state can make no claim in respect of periods earlier than six years ago, because of this negligence and because no demand has been made for six years (Statute of Limitations). Similarly, no claim can be made for recent years, because of the department's negligence in not advising the client to report changes, and the department not monitoring the facts.
The disputed pension is the top slice of income, bearing the top slice of the corresponding tax liability at whatever rate(s) applied for each year concerned. Accordingly, it is a basic requirement to establish what tax was paid in any disputed year. Any repayment made, for no matter what year, should be net of the income tax thereon. It may be that the departments will claim that, technically, repayment is due gross to the Department of Work and Pensions and that tax should then be reclaimed from the Inland Revenue, whereupon a great issue would no doubt be made of any period more than six years ago. But the client is not interested in such niceties, and should refuse anything more than the net amount. Let the departments settle between themselves any transfer from one state pocket to another. The spurious element in his receipts was reduced by the tax charged on it, so only the net can be open to claim. - Man of Kent.
Editorial note: The 'additional pension' referred to by the querist is presumably what is now known as adult dependency increase (or 'ADI') as the term 'additional pension' nowadays usually means 'SERPS', the state earnings related pension. It is understood that currently the adult dependency increase would be paid at a maximum rate of £45.20 per week to, say as in this case, a male pensioner whose wife is aged under 60 and whose weekly earnings are less than £53.95. Furthermore the wife's date of birth would be recorded at the time of such a claim, so that shortly before her sixtieth birthday she would be invited to claim a retirement pension in her own right. This pension, if paid as a result of her husband's contributions, could also be £45.20 per week. In a straightforward case, the adult dependency increase would cease as the wife's pension started.
As suggested by 'Man of Kent', it is possible that this error has come to light as a result of the client's wife claiming a retirement pension on reaching 60 years of age.
If this is not the case, and the client's wife is already over 60 and has not been receiving a pension, there may be an (equitable) case for arguing that the overpayment to the husband should (in part at least) be set off against the underpayment to the wife. However, that would be purely concessionary, as claims to retirement pension can only be backdated by a few months. If the client's wife is over 60, the position might be slightly strengthened as this may indicate a failure in the department's review procedures.
The appeal process against the department's decision is set out in leaflet GL24, If you think our decision is wrong, which can be found on the Internet at www.dwp.gov.uk/publications/dwp/2002/gl24.pdf
