Unpaid tax

I am 60 years old, live in Dunfermline, Fife and have suffered from a chronic mental health illness since I was 25 years old. I worked for 12 years for Fife Council but in 1989, after a year off work and a long spell in hospital, I was retired on medical grounds, and have an occupational pension.
For almost 12 years I lived in council rented accommodation with no-one advising me that I could claim anything other than Incapacity Benefit such as help with rent, Council Tax etc.

In 2004 I was referred to and joined a local Mental Health Support Group where I found out about the things I could have been claiming and in 2009, even though I was working part-time, my key worker insisted on me applying for DLA. Just on the basis of the form I was awarded the middle care and mobility rate indefinitely.

To cut a long story short, through this group, I went on a work placement for 6 months and was kept on in a part time post from May 2005. I needed a bit of support and managed well until my health deteriorated again due to a change in working conditions, I went off sick in April 2011 and had to give up the job in August 2011.
During the time I was working I was paying no tax for my pension and it was all taken from my wages. After leaving, I applied for ESA, had a medical and given Employment Related ESA in the support group and did not give it much more thought.

Over a year later, I was called to an interview at the local Jobcentre Plus to discuss my benefits. I went into a room where a woman sat behind a perspex, no doubt bullet -proof screen with a pile of papers in front of her. She had come through from Glasgow and said that it had come to their attention that I was receiving an Occupational Pension but had not declared it on my form. I had been overpaid around £1,500. When I fill in forms, especially when I am ill, I always get someone to double check my forms so knew deep down that I had given them all of the details but she was so insistent they did not have this information that she made me doubt myself. I was told it would be going to a debt review and not only would I have to pay the money back but there could be further proceedings because of fraud.

I was suffering from severe depression and anxiety and this nearly pushed me over the edge. My psychiatrist offered me a spell in hospital as I can also revert to serious self-harming when anxious. I declined this offer but was receiving a lot of support at home. I cannot remember exactly how long I waited, definitely around three weeks, watching every day for a brown envelope coming through the letter box. I was convinced that I was going to get a criminal conviction which horrified me! I started my working life as a High School teacher before moving into Social Work. My family had teachers and policemen in it and I was frightened to tell anyone apart from doctors and nurses.

One morning my phone rang and it was the lady who had interviewed me. She said she had been given my original application and the 'person' who had checked it had not read the back page where I had said I received a pension and because it was their fault, I would not have to repay the money. No 'sorry for the distress' and making me feel like a criminal but because of this I was being moved on to Contributory ESA. I never even got an apology of any kind for being accused of being a benefits cheat, all down to some incompetent idiot not reading a form properly. I still do not understand why someone drove about 40 miles with a pile of papers that did not have my original ESA application amongst it!

I was then worse off because my pension is taxed at source and although it still goes into my bank account, my benefit was reduced by this amount. At the end of 2012, I got a letter from Inland Revenue saying that as I had been getting two incomes and had not told them I had underpaid £112. They knew I had a pension during the time I was working but said I should have told them I was still getting it once I had left my job. I just paid up as they were adamant about this. Then in October 2013, I got another letter saying I owed them just over £500. I was advised by Citizens Advice to repay this over as long a period as possible, they eventually agreed on four years at £11.51 per month.
This was all triggered off by a cock-up by the DWP and the tax people said it made no difference that I had been getting too much money by mistake, the fact that I had got it and had not told them I had two jobs (it seems ESA is classified as a job!) I still had to pay it, so I still have two years and eight months to go before this debt is gone. I have never been in debt in my life and it is a hard pill to swallow, along with all the others I have to take.
I do not know if I have any grounds for getting this tax back but I resent the fact that these agencies automatically assume you are deliberately trying to defraud them.
I am now dreading the forthcoming, starting nere in October about being assessed for the change from DLA as I am convinced that this is just a way of cutting even more benefits. Sorry for the length of this but Ii was just in a mood to get this off my chest and find out if this tax has to be paid back and why am I being taxed for a pension that I worked 12 years for but am not allowed to keep!