Tax refund form causing confusion, admits HMRC

HM Revenue & Customs is making urgent changes to a new tax refund form, issued following the government's pension reforms, after conceding it was "badly worded" and causing confusion.

On Thursday, HMRC said it would update the form "as soon as possible", after pensioners complained that the document, issued only a month ago, was misleading.

The tax authority has since apologised to a 71-year-old for causing distress after it continually advised her to use the form to reclaim several thousands of pounds in overpaid tax, when the document stated she was ineligible to use it due to her circumstances.

HMRC issued form P55 on April 6 to help pension savers reclaim 30-day refunds on any overpaid tax, if they had accessed their pension pots under the new freedoms.

Many savers were expected to face big upfront tax deductions as HMRC had also instructed pension providers to tax accessed pension cash withdrawals at an emergency rate, unless the customer had supplied a P45.

However, one customer, who had money deducted after she took cash from her pension last month, said the form made it impossible for her to claim.

"The P55 form cannot be used to reclaim tax if the person is taking more than one payment in the year, which I intended to do," said Margarete Petrie, 71, of Buckinghamshire. "This is clearly stated on the form."

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"I felt like I was banging my head on a brick wall," she said. "I want to reclaim this tax, but the form was saying one thing and the tax authorities another."

After the Financial Times intervened, the HMRC conceded that people in Mrs Petrie's situation could still claim a refund using P55, but the form was "badly worded" and was causing confusion.

"I can confirm that it is possible to use form P55 to ask for a repayment," said a HMRC official.

"We will certainly look at updating the wording on the form as soon as possible and are sorry for any confusion the wording is causing.

"We apologise to Mrs Petrie for the distress and inconvenience we have caused her and her family."

HMRC said the form was primarily designed to allow customers taking one payment from their fund to claim a repayment in-year, rather than wait until the tax year end to receive an automatic repayment.

It added that where a pensioner wanted an immediate refund and did not want to take any more out of their pension fund "for a few months", they could still use form 55 and be repaid directly.

"At the same as making a repayment direct to the taxpayer, we will issue a revised code to the pension provider so the correct code is operated on the next payout," added HMRC.

New rules which came into force from April 6 allow individuals with defined contribution pensions to take their savings as a cash lump sum from age 55, subject to tax at their marginal rate.

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