Mr S complained that in light of HMRC's mishandling of his Self Assessment tax returns and poor complaint handling, the £45 compensation HMRC offered him, a sum agreed as reasonable by the Adjudicator, was inadequate and should instead have been in line with the £100 penalties that had wrongly been imposed on him.
What happened
HMRC did not set up Mr S's Self Assessment tax details correctly when he went into business. It then sent Mr S a computer‑generated notice asking him to file a tax return for the wrong year (2009‑10). When he did not submit the return by the due date, he received an automatic £100 penalty notice. However, although HMRC agreed that the penalty notice should not have been issued, it did not take the necessary steps to prevent this happening again, which it did. HMRC then sent Mr S a confusing letter claiming, contrary to what he understood he had just been told, that he did need to complete the 2009‑10 Self Assessment return.
When HMRC eventually admitted to a number of errors that had caused Mr S worry and distress, it offered him compensation of £25. However, Mr S considered that, given the professional time he had spent dealing with HMRC's incompetence, he should have been compensated in line with the £100 penalties it had wrongly imposed on him. HMRC said it was not authorised to make such a payment.
When Mr S tried to pursue his case further, to tier 2 of HMRC's complaints procedure, HMRC failed to acknowledge his letter. By the time it did so (more than two months after he sent it), he had already escalated his complaint to the Adjudicator.
The Adjudicator then took 20 months to deal with Mr S's complaint because of major resourcing problems. It concluded that although Mr S's tax affairs and his complaint had been poorly handled by HMRC, the apologies it had offered, plus the compensation of £45 (increased by £20 for poor complaint handling), was reasonable and in line with its redress policy.
The Adjudicator also agreed with HMRC that its guidance did not allow it to pay compensation for the hypothetical cost of 'own time', and that there must be evidence of actual loss of earnings.
What we found
We were broadly satisfied with the way the Adjudicator handled Mr S's complaint. Its decision, not to agree to his £100 compensation claim in respect of the cost of his 'own time' spent trying to sort things out, was in line with HMRC's Complaints and Remedy Guidance Manual. We also agreed that there was no procedural basis for the Adjudicator to support Mr S's view that HMRC's compensation offer should be in line with its £100 penalties.
However, we took a different view to the Adjudicator on the level of the injustice and the amount of redress needed to remedy that injustice. We also upheld Mr S's complaint about the inadequacy of the redress provided by HMRC in respect of its service failures and poor complaint handling and asked it to increase its compensation from £45 to £145.
Putting it right
HMRC paid an additional £100 compensation, and this was a suitable remedy for the impact on Mr S of HMRC's poor service and complaint handling. Mr S was satisfied with this outcome.
HM Revenue & Customs
The Adjudicator's Office
UK
Not applicable
Compensation for non-financial loss