Committee of public accounts chairman Edward Leigh says older people are “getting a raw deal” as an over-complicated system means that an estimated 2.4 million older people have overpaid £200m in tax on their savings.
The report says many people do not realise they may be able to claim back part of the tax paid or they can claim to receive interest on their savings gross of tax if their income is below the personal allowance. An estimated 1.5 million older people have also overpaid £250m because of discrepancies between HM Revenue & Customs’ records and their employers and pension providers.
In the report, Conservative MP Leigh concluded that systems for dealing with older people’s tax affairs are too comlex, create uncertainty for older people and result in too many overpaying tax.
He is now calling for the HMRC to establish a clear plan by June 2010 to make it simpler for older people to fulfil their tax obligations and reduce the level of error in payments
The report says: “The department should track the costs of helping older people with their tax affairs, the quality of service it provides and their take-up of allowances. It should estimate the likely impact of the forecast growth in older people and decide how it will provide effective support as the number of older people increases.”
The report also identifies that the HMRC does not know for certain how many people are eligible for age-related allowances but do not receive them and that the age-related allowance rules are complex. It calls on HMRC to identify these people and take steps to ensure they receive what is due to them.