For those of you who read my blogs, by now you will appreciate that, as a rule, I don’t set out to deliberately bash HMRC because there are a lot of good Inspectors out there who play fair and do a good job. The vast majority of cases I have with HMRC are worked on a good basis borne out of professionalism and respect on both sides. There are, however, a few that aren’t.
I had one such case last week. We have taken on the affairs of a medium to large sized company together with its directors and shareholders. As part of the handover process we were advised that HMRC had started an employer compliance review around 18 months ago and that the reviewing officer had correctly identified that there were some taxable travel payments relating to the directors. There was a flurry of correspondence over several months and the officer had proposed a series of assessments which were not unreasonable. There were a few loose ends which hadn’t been fully resolved and were not connected with the travel payments, but they were nothing major and everyone was expecting the case to be settled. Then for no reason the case went dead. Nothing was heard from HMRC for months on end. I can’t say for sure but I think that the officer had either changed job or maybe left the department. No-one really thought that the enquiry had gone away for good, but HMRC had clearly lost the initiative and, unfortunately for HMRC, several years had dropped out of charge for assessing purposes. How sad.
Then, out of the blue, a letter arrived from a new case officer at HMRC. It started with a short introduction to explain that the officer is now responsible for this case, followed by a list of the information which he believed is outstanding, and finally the icing on the cake, a deadline of three weeks to provide the information. I phoned the officer on receipt of the letter and asked, in a friendly way, how he could justify a period of three weeks to provide information when HMRC had sat on the case for over a year. I also pointed out that almost all of the information he was asking for was no longer relevant. I have to say that the officer was a likeable chap, very friendly, and appreciative of the unusual circumstances of the case. He immediately extended the deadline for replying and said he would take on board my comments.
After a review of the case with the client we drew the conclusion that tax was obviously due on the director’s private travel payments, but that HMRC would clearly need to re-adjust the number of years they were looking to assess. We did consider trying to have the case closed without any assessments being raised but felt that HMRC were never going to agree to this. We made an argument to HMRC about client “behaviours” and proposed that the years HMRC was looking to assess was reduced quite dramatically, which HMRC accepted with fairly good grace. We also expressed the opinion that, because of the excessive delay, the balance of information relating to the non-travel issues should not be requested.
After a month we heard back from HMRC. The reduction in the years of assessment was agreed, but apparently the case officer could not stop asking questions about the other non-travel issues. These were still relevant issues, he said, and the fact that HMRC had fallen asleep for a year was seemingly neither here nor there. Our client had until the end of the month to get everything together and then send it to HMRC. I rang the officer as soon as I received the letter and suggested that he speak with his manager. I explained, whilst trying to keep a lid on my exasperation, that we could have easily made a complaint about the delay in this case but that we had tried to move the case towards settlement. I reminded the officer that the additional information he was asking for was bordering on irrelevant for tax purposes, yet it would take our client a lot of time and effort trawling back over the records. I suggested that the working of this case wasn’t HMRC’s finest hour and that it would suit everyone concerned to take the settlement and move on. An hour later the case officer rang me back. It seems his manager had told him HMRC is fully entitled to pursue the requests for information and that our client has no alternative but to comply. I asked if the manager would be prepared to speak to me but I was told he would not.
It is at this point in a case that my blood boils. We’ve been as fair as we can and as helpful as we can, but I am sure that there are some people in HMRC that construe such an approach as weakness. I have come across a few HMRC Inspectors and officers over the years who think they have a God given right to do and say whatever they want with little or no regard to tax laws or published working practices. I genuinely hate making complaints about HMRC, but sometimes it is necessary and I included the following extracts in the formal complaint letter that was posted and emailed to HMRC earlier this week:
- At no stage has it been explained why there was no contact from HMRC in this case for over a year. This is an inordinate amount of time for a HMRC officer not to deal with a case or make any contact with the taxpayer. It is disrespectful in the extreme and shows a complete lack of professionalism on the part of HMRC as a department. Can we please have a full and honest explanation of the delay and why the client was not kept informed.
- HMRC officers have a duty of care to act responsibly and professionally when dealing with taxpayers. This is particularly important when dealing with sensitive issues such as enquiry cases. HMRC officers should be aware that enquiries are extremely stressful and they should not prolong the process unnecessarily. We would like the reviewing officer to speak with your case manager and then advise us to what extent the case manager considered this point, particularly after we had given HMRC an opportunity to reconsider its approach.
- To incur a delay of such magnitude constitutes incompetence and negligence on the part of the case officer and the manager. Even if the original case officer had been reassigned surely it is the manager’s job to be aware of the cases he is responsible for overseeing. To simply try and pick up the case without offering any explanation or apology is arrogant and unprofessional. Can the reviewing officer please explain exactly why the case officer and case manager felt it was reasonable to proceed in this manner.
- In terms of the information requested, we cannot see that HMRC initially made any effort whatsoever to check what information is relevant in terms of the potential assessing periods. Before we challenged the basis of the request, the information requested about casual labour and director’s pay and forms P14 dated back to 2010/11 which was clearly out of time for tax purposes. Can the reviewing officer explain why HMRC did not initially make any attempt to check what information it was asking for rather than just copying the last letter on file.
- HMRC has a duty to treat all taxpayers fairly under the taxpayer’s charter. This includes respecting taxpayers, providing a helpful and efficient service, being professional and acting with integrity. It is our opinion that HMRC has failed in each of these aspects. It should also be noted that had HMRC‘s initial letter gone unchallenged, then our client would have been put to the inconvenience and additional cost of providing information that HMRC is clearly not entitled to in terms of the time periods involved. Can the reviewing officer please comment on whether any consideration was given by the case officer and the case manager to the time and cost element of HMRC’s actions. Does the reviewing officer accept that elements of HMRC’s initial correspondence following the years delay are incorrect in law for this reason.
CLAIM FOR COSTS
We are keen to progress this matter towards settlement and our client is still willing to settle the liabilities relating to the home to office travel. We believe we have been more than reasonable in this respect. We have, however incurred costs in dealing with the HMRC delay and pointing out various factual inaccuracies to the case officer and the case manager. Our client should not be responsible for the costs that arise through the negligence and incompetence of HMRC officers and we will ultimately be seeking a settlement from HMRC in respect of the fees of preparing this letter. Any additional fees incurred in connection with the request for information will also be charged to HMRC. We will also be seeking compensation for the unnecessary and adverse delay on the part of HMRC and its officers.
I am never an advocate of picking a fight with HMRC unnecessarily, but when the situation calls, and HMRC is clearly being unreasonable, then I don’t see any reason to hold back. I’ll let you know how we get on.
Neill Staff is our specialist tax partner. Contact him at email@example.com or call him on 020 8418 2671. You can also follow him on LinkedIn.