HMRC kept giving incorrect information

What happened

Mr J complained that HMRC had not handled his tax affairs correctly, which had led to an underpayment in tax. He asked HMRC to tell him how much tax he owed in spring 2011, but he did not receive a response to this request. In autumn 2012 HMRC told Mr J that he owed over £2,300 in tax. Mr J asked HMRC to waive this tax under Extra Statutory Concession A19 (this allows HMRC to not collect arrears if it delayed notifying the taxpayer that there is underpaid income tax, capital gains tax or Class 4 NIC). HMRC agreed to waive some of the tax due, but still asked Mr J to pay nearly £1,500.

Mr J said he had not received a satisfactory explanation of why the provisions of the concession did not apply in his case. Mr J said he had a reduced pension income, and had therefore been affected both financially and emotionally by this matter. Mr J wanted HMRC to give up the remaining tax that he had been asked to pay.

What we found

We partly upheld this complaint. HMRC carried out at least three full reviews of Mr J's complaint: one at tier 1 of its complaints process, one at tier 2 and one when preparing a report for the Adjudicator's Office, which handles complaints about HMRC. On every occasion, HMRC got something wrong. It contradicted itself to the point where it no longer knew which response was correct. HMRC's reviews did not explain properly: how the underpayment for 2010–11 arose; which parts of the underpayment arose because of its mistakes; which part of the underpayment it was giving up; why it had to consider each part of the underpayment separately; and why it could not give up the remaining tax due.

Disappointingly, the Adjudicator's Office failed to spot these failings and correct HMRC's explanations. We therefore decided that HMRC and the Adjudicator's Office had failed to explain their actions properly and had failed to put things right.

Putting it right

Although HMRC had already given up some parts of Mr J's underpayment, some of those decisions were incorrect. These incorrect decisions compounded Mr J's confusion about why it refused to give up some other parts of the 2010–11 underpayment, and he needed this to be clarified.

As we had identified that HMRC's explanations of 2010–11 were unclear and incorrect, we asked it to carry out a further review for us. We then considered its responses and were satisfied that they were now correct. We also asked HMRC to waive part of Mr J's tax under the concession, which it should have done in the first place.

However, we found that even if an underpayment of tax is caused by HMRC, that tax is legally due and remains payable. The error is a delay in telling the taxpayer to pay, and not that the tax is not due. Even when HMRC makes such mistakes, the tax must be paid. In rare occasions such as in this case, part of the tax due can be waived if certain conditions are met.

HMRC apologised to Mr J for having repeatedly given him incorrect information. It refunded just over £53 of his 2010–11 underpayment, which represented the part that arose due to its failure to act on information. In addition, HMRC sent Mr J a formal notification showing his settled liability for the 2008–09, 2009–10 and 2010?11 tax years. It also paid Mr J a further £100 (on top of the £150 it had already paid) to acknowledge the errors identified in our report and the impact these had had on him.

The Adjudicator's Office apologised to Mr J for missing the opportunity to put things right for him.