HMRC sent £2,057 tax bill to my mum in her care home

MY 87-year-old mother has received a demand for underpaid tax from HM Revenue & Customs for £2,057 for the tax period to April 5, 2016.

She is ill with dementia and lives in a care home in Northants. Her income for that time was from two small works pensions and her state pension, amounting to £16,630 before tax.

She paid £1,057 tax that year and has always paid her taxes.

Surely HMRC has not done its job properly by collecting the right amount of tax at the right time?

It’s impossible for her to find such large amounts as she is paying £3,500 per month from her savings, which have almost gone, towards care home fees. We are in the process of selling her small bungalow to continue to pay the fees. A. B., Northants.

It’s distressing enough for anyone to be told out of the blue that they owe tax — let alone someone in your mother’s position.

HMRC says she underpaid income tax because she was issued with an incorrect tax code on one of her two private pensions. One is with scottish Widows and worth £2,833 a year.

the other, worth £3,220 a year, is with Canada Life and belonged to her husband prior to his death in 2010.

the mistake occurred when your mother began to receive her late husband’s Canada Life pension. It should have been listed as a second pension, but it was listed as a primary one.

that might sound trivial, but it’s a big deal to the taxman because it helps determine how it applies your £11,000-a-year taxfree personal allowance.

For pensioners, the £ 11,000 allowance is first used up on state pension payouts. If there’s any-allowance left (often there is), the allowance is applied to each additional income in turn, until it runs out and tax is deducted.

so, by mistakenly listing two primary incomes, HMRC applied the allowance twice and collected too little tax from the Canada Life payouts. And for seven years the taxman failed to spot your mother had the same tax code on two pensions.

It turns out that every year since 2010 it has sent your mother a letter asking her to stump up the underpaid tax. And everyyear she has paid it. You say she did not like to be in debt and would have quickly settled up and not thought to question it.

HMRC says it should have noticed something was awry-much earlier, but ‘did not handle this well at all’.

‘We had at least one opportunity-to update her record, but did not do so,’ it says.

Given your mother’s poor health and financial situation, the taxman has written off the unpaid tax and will do the same for this year, as it believes she has also underpaid over the past ten months. It has rectified her tax code and she should be taxed correctly from now on. IN SEPTEMBER, we booked British Airways flights to New Zealand costing £1,560 to see our niece get married.

But just after Christmas our daughter suffered a stroke when her newborn baby had to be rushed into hospital with breathing problems.

Doctors said she needed looking after 24 hours a day and, with a poorly baby and her husband out at work, we felt we couldn’t go to New Zealand.

We cancelled the trip and asked BA for a refund, but it has refused, only returning £350 in taxes. K. F., Chelmsford, Essex.

YOUR letter took my breath away. What a heartbreaking ordeal for your family. the last thing you needed was for a trusted firm such as BA to show so little compassion.

I’m happy to report that mother and baby are on the mend — though from what you say it could be some time before your daughter is back to full strength. so, the trip to New Zealand this month is still very much off.

BA says that if a customer phones and provides medical evidence that they can’t travel, it issues refunds on a case-by-case basis. However, it says you have to call first, rather than cancelling the trip yourself.

unfortunately, in the heat of the moment you cancelled online without letting BA know what was going on. understandably, talking to an airline was the last thing you wanted to do. You then called at a later date and provided a doctor’s letter outlining your daughter’s condition.

I can’t see why BA couldn’t have considered your case then and refunded you the cost. But it stuck rigidly to the letter of its rules about calling customer services before you cancel.

BA says it then asked if you had insurance, and you said no.

You admitted to me that you did have cover, but were concerned your insurer, CoverCloud, would refuse a payout because your daughter was not named on the policy.

We all make mistakes when we’re under stress, but there’s little to gain from bending the truth with big firms — and lots to lose.

CoverCloud says you’ve since submitted a claim and it has offered to cover the £1,560 cost of the trip.

BA has reviewed your case more carefully and agreed to a full refund after all, so that shouldn’t be necessary.

A British Airways spokeswoman says: ‘We are sorry to hear what the family is going through.

‘ Given the extremely sad circumstances, we are refunding the cost of the flights and hope they will be able to reschedule the trip in the future.’