Money
Tax and benefits
Tax help for older people - the man who fights for victims of our complex tax system
John Shepherd talks to a tireless campaigner for justice who has established an unlikely 'tax haven' in a Dorset barn
What makes an affable, mild-mannered man like Paddy Millard cross?
So cross that at 64 it propels him out of bed each day to do battle on behalf of thousands of older people? A former officer in the Royal Artillery, he has her Majesty’s Revenue and Customs firmly in his sights.
To begin at the beginning, Paddy's return to civilian life saw him take a job with one of London's 'loony left' councils. Tiring of the graft and corruption he says he encountered, he resigned and became a founder member of the fledgling Low Incomes Tax Reform Group, which campaigns for a simpler tax system.
Its pilot scheme to help pensioners with tax problems has developed into the national charity TaxHelp for Older People (TOP). Paddy is now chief executive and leader of an army of dedicated Tax Volunteers who give free advice to older people.
TOP is receiving funding this year of £186,000, mainly from the National Lottery and, wait for it, from HMRC. But if the Revenue funds the charity, is there not a conflict of interest somewhere along the line?
"No," Paddy says, "even the Revenue admits it is not much good at dealing with the unrepresented, which encompasses older people. Consequently the tax system is skewed against them. Two examples: we had the case of an 81-year-old blind widow who made a considerable effort to visit her tax office, seeking help in filing her first self-assessment form. She was refused help, and I'd say she was mugged by the system."
The second concerned a 91-year-old Somerset man who, after retiring at 65, had never received the age-related personal allowance (now worth £9,180) to which he was entitled. He was unaware of this and had been paying too much tax for 26 years. The Revenue has no duty to tell pensioners about allowances, so TOP claimed a refund on his behalf. But far from receiving an expected £8,000, he got just £2,000 because the Revenue only refunds up to six years back tax. Paddy believes thousands have been wronged in this way.
However, help is a telephone call away. TOP has more than 550 volunteer experts who hold tax clinics in 286 locations throughout the UK; they even make house calls to the infirm. The national call centre is in deepest Dorset at the end of a narrow lane. The two-room office is housed in what used to be a barn.
Carole Pavely, aged 47, gave up her unfulfilling job as a council cleaning contracts manager more than three years ago and says she has never been happier. As administrator she sets up appointments with Tax Volunteers. "Those who ring in have nowhere else to turn for help. They can't possibly afford an accountant and they simply don't know how to talk to the tax people. It helps that many of us in the team are of, shall we say, mature years and with our volunteers it’s often a case of the elderly helping the elderly," she says.
There is only one rule: to qualify for help, callers' incomes must not exceed £15,000 and, to put that into context, the average pensioner income is £11,500. Another team member, Marina Lee, 52, had previously worked in an auction house and a small hotel. After training she now fields calls which always begin with a quick tax health check. "We can tell immediately if callers are paying – or are being asked to pay – the correct amount of tax and the answer is often enough to end their worries," she says. "The more calls you take, the more you realise how afraid older people are of dealing with officialdom."
For more complex problems there are Tax Volunteers, many of them accountants, tax experts and some solicitors, who hold clinics on neutral ground often provided by Age Concern or Citizen's Advice.
The ranks of retired tax officials are a fertile recruiting ground. According to Paddy, there is nothing quite like the zeal with which a retired tax inspector pursues his former colleagues when errors occur.
Statistics demonstrate that TaxHelp is worthy of the volunteers' efforts. Among pensioners and retired people with tax worries, as many as nine out of 10 have received incorrect assessments, with too much tax being demanded. In the last 12 months about 2,000 of TOP's 20,000 clients received refunds totalling £240,000 and tax written off by the Revenue amounted to more than £40,000.
As further evidence of tax "mugging", the average refund to a pensioner is £840 compared with only £250 to someone in work. The explanation? "If dear old Darby or Joan query something, the Revenue's immediate response is to say the demand is right. And if the Revenue says it's right how can you, a pensioner, disagree?" Paddy asks.
And tax problems continue to mount. Hundreds of calls a week are being fielded by TaxHelp from anxious people, mainly widows in their sixties, who have received unexpected demands for back-tax amounting to anything from £1,000 to £7,000. Some are accompanied by threats that if the sum is not paid within 30 days, steps will be taken to recover the amount. They are told that this might even include being forced to sell their homes.
Paddy says that many people, faced with increased living costs, have had to take low-paid work in order to pay council tax and heating bills.
Many have fallen into the trap of believing state pension does not attract income tax. What the Revenue does, and it takes them two, three or more years to catch up with people's tax affairs, is to add the state pension to total income over a period and tax the whole sum. A widow caught in the trap may typically be earning £5,000 tax paid by her employer, receiving £5,000 from her deceased husband's pension, and the state pension of £4,539.
"It never occurs to her, because the Revenue has no mechanism for informing her, that she has to declare the state pension as income. So in year one she is automatically £900 in arrears, plus interest, and it can continue at this rate all the time she works," says Paddy.
The solution, in his view, is to introduce an infallible system whereby the Department for Work and Pensions informs the Revenue by computer when a state pension starts to be paid. This way the additional tax burden can be communicated to the taxpayer immediately. Instead, such is the failure generally within the system, this rarely happens, leaving older taxpayers vulnerable to demands that many find impossible to pay.
So what would make Paddy happy? Two things: for the Revenue to be more efficient and accountable when things go wrong, and to raise the old age pension to £12,000 to help alleviate pensioner poverty.
* TaxHelp for Older People, www.taxvol.org.uk, tel: 0845 6013321 weekdays, 10am to 5pm.
* This article first appeared in the June 2008 edition of Saga Magazine. Click here to subscribe.
