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Case studies
We have collected together some case
studies which illustrate the work that
we do and demonstrate how complaints are
resolved.
HM Revenue & Customs
Case study 1: Recovery of an overpayment
where the parties have separated
Case study 2: Overpayments of Tax
Credits
Case study 3: Main responsibility for
qualifying child
Case study 4: Inappropriate
disclosure of information
Case study 5: Underpayment of tax across
several years
Case study 6: Underpayment of tax
Case study 7: HMRC Enquiry
Valuation Office Agency
Case study 8: Payment of interest on
refunded council tax payments
Case study 9: Claim for interest and
agents fees
Insolvency Service
Case study 10: Misleading advice and
failure to act
Case study 11: Bankruptcy
Case Study 1: Recovery of an overpayment
where the parties have separated
Issues
Mr A was unhappy about the TCO’s
decision to recover overpaid tax credits
from him.
Whilst Mr A did not dispute the actual
overpayment incurred in relation to the
joint claim he made with his former
wife, he felt that the TCO should not
seek recovery from him.
He claimed not to have received any of
the tax credit payments made because
they were paid directly into his former
wife’s single account and he did not
have access to this. He felt the
overpayment should be recovered entirely
from his former wife.
However, whilst the TCO sought
clarity about the actual date of
separation, they also paid both
claimants individually.
Outcome
The Adjudicator did not uphold this
complaint.
The overpayments were caused by the
TCO’s mistake in not correctly recording
income information which Mr A and his
former wife had provided to them. Award
notices were issued showing incorrect
information. However, in order to meet
the responsibilities under COP 26, Mr A
should have contacted the TCO within 30
days of receiving the award notice to
notify them that the information on the
notice was wrong.
Mr A and his former wife failed to do so
and in the Adjudicator’s view, they
too had not fulfilled their
responsibilities under COP 26.
With regard to liability for repayment
of an overpayment, the Adjudicator
explained that when a joint claim is
made, claimants nominate an account to
receive payments. The declaration, which
is signed by both parties, holds them
both responsible for repaying any
overpayment.
The Adjudicator did not concur with Mr
A’s view that he should not be partly
responsible for repaying the overpaid
tax credits, more so as he had
received some of the money directly.
However, since 21 September 2009, new
TCO guidance regarding
the recovery of an overpayment following
a household breakdown, stipulates that the TCO will not seek to
recover more than 50% of the outstanding
overpayment from either party.
Consequently, the TCO confirmed that, in
the absence of an agreement between Mr A
and his former wife for repaying the
overpayment, the TCO will seek to
recover half of the overpayment from
each of them.
The Adjudicator said that this was
reasonable and in line with the HMRC
guidelines.
Learning
The TCO accepted that they had made
mistakes and paid Mr A compensation in
recognition of this. However, the
Adjudicator recommended additional
redress to acknowledge the service
failure issues in recording inaccurate
personal details for the customer,
coupled with the worry and distress
suffered.
She asked that TCO staff ensure a higher
degree of accuracy when entering
personal data for customers on their
systems.
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Case Study 2: Overpayments of Tax
Credits
Issues
An overpayment occurred because the TCO
said that Mr and Mrs B
did not respond fully to the Annual
Declaration for 2003/2004.
As a consequence their award was
terminated, and all payments for
2004/2005 considered an
overpayment.
However, Mr and Mrs B had in fact
responded to the Statement of Account,
but the TCO failed to reinstate the
award.
Another overpayment occurred for 2006/07
because Mr and Mrs B had indicated that
Mr B was in receipt of Income Support
(IS): however his claim for IS was
unsuccessful but he did not inform the
TCO of this.
Outcome
The Adjudicator partially upheld this
case
A Statement of Account was issued in
February 2005 and Mr and Mrs B responded
to this within 30 days, therefore, their
claim should have been restored at this
stage, but it was not. The TCO accepted
they made a mistake by not reinstating
the claim.
The claim was subsequently reinstated
and as a result, Mr and Mrs B were owed
tax credits for 2005/2006 and 2006/2007.
However their claim was ‘stuck’ in a
processing queue and payments could not
be issued.
The TCO offered to make manual payments
in October 2008. Initially Mr and Mrs B
decided to wait until the system problem
was resolved; but, during the course
of the investigation into their
complaint they changed their minds and
requested the payments. The TCO said
that they were awaiting new guidance and
therefore unable to issue payments at
that time.
Mr and Mrs B asked for the remaining
2006/07 overpayment to be given up in
light of exceptional circumstances,
primarily because of Mr B’s ill health.
After very careful consideration of the
potential exceptional circumstances of
this case the Adjudicator concluded that
Mr and Mrs B had demonstrated a
reasonable level of ability to manage
their own affairs. They had continued to
apply and deal with a number of issues
relating to their claims for benefits
during the period of his illness and she considered
that it was not unreasonable to expect Mr and Mrs B to able to contact the TCO
to advise them that Mr B was not in
receipt of IS.
The Adjudicator reached the view that
Mr and Mrs B should repay the 2006-07
overpayment and TCO should pay the
outstanding money for earlier years.
Learning
The Adjudicator wrote to the Director of
the TCO expressing her concerns about
the delay in making manual payments for
2005/06 and 2006/07. She said that, in
her view, it was unreasonable for monies
legitimately due, and owed for several
years in this case, to be withheld
because of a computer system fault.
Particularly, as it would appear that a
previous offer of payment had been
withdrawn.
The TCO accepted that they had made
mistakes and not handled the
complaint well. They offered to make a
redress payment which the Adjudicator
considered to be reasonable.
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Case Study 3: Main responsibility for
qualifying child
Issues
The TCO determined that Mr C had the
main responsibility for his son.
However, they subsequently amended this
decision and noted their records to show
that he did not have main responsibility
for his son. The tax credits he had
received were therefore classed as an
overpayment.
Later Mr C advised the TCO that there
was a new court order giving joint
responsibility to each parent. The TCO
reinstated their records to show that Mr C
was entitled to tax credits from the
date of the court order and started to
make payments to him.
Outcome
The Adjudicator upheld this complaint.
The Adjudicator has no involvement in
deciding who has main responsibility,
for tax credit purposes, for a child.
Such matters are considered
on appeal by an independent tribunal.
However, during the course of
investigating Mr C’s complaint the TCO
established that the decision to
re-instate Mr C’s entitlement had been
made without following correct
procedures. After taking into account
information from both Mr C and his
former partner, TCO decided that Mr C
did not in fact have main responsibility for
his son for tax credit purposes and that
he had been overpaid.
Having reviewed the circumstances
surrounding how Mr C’s overpayments
arose the TCO decided that he would not
need to pay them back. The TCO accepted
they did not follow their own procedures
in seeking further information about the
main responsibility for the child at the
appropriate time.
The TCO also offered to make a redress
payment to recognise the worry and
distress, delays and direct costs.
Learning
The TCO should have made further
enquiries with both Mr C and his former
partner in order to establish which of
them, for tax credit purposes, had main
responsibility for their son. This
should have been done before amending
their records.
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Case Study 4:
Inappropriate disclosure of information
Mr and Mrs D complained that their
customer records had not been updated,
their claim had been stopped incorrectly
and there had been an inappropriate
disclosure of information.
Issues
The Adjudicator often sees cases where a
number of issues affect the overall
standing of a claim.
In this case, the TCO incorrectly
amended Mr and Mrs D’s personal
circumstances which resulted in their
awards being terminated from the start
of their claim.
Mr and Mrs D received demands for
repayment of all of the money that they
had received. Whilst Mr and Mrs D
continued to be entitled to tax credits
they did not receive any further
payments.
Mr and Mrs D were also unhappy with the
explanations given to them by the TCO.
Outcome
The Adjudicator upheld this complaint.
The Adjudicator felt that the TCO’s
explanations of how they had handled Mr
and Mrs D’s affairs had been “minimal
and confusing”. There had also been an
inappropriate disclosure of information
as a letter Mr and Mrs D
had written to the TCO had been sent
to an unconnected party. In addition
the TCO failed to make manual payments
to Mr and Mrs D as promised, failed to
respond to some letters and included
inaccurate details in some of their
replies.
Mr and Mrs D were overpaid tax credits
for 2003/04, 2004/05 and 2005/06 due to
the level of their household income.
However, Mr and Mrs D had received a
letter from the TCO which said that
“when the system updates you will not
have an overpayment showing on your
award”. As a result the TCO agreed that
it would be wrong to expect Mr and Mrs D
to repay the remaining overpayments.
In addition, Mr and Mrs D had a
continuing entitlement to tax credits,
but, because the TCO had terminated
their claim, an underpayment had
occurred for 2006/07. The Adjudicator
supported the TCO’s decision not to
recover the remaining overpayments, and
to pay the underpayment.
Mr and Mrs D were unhappy with the level
of compensation previously offered by
the TCO. The Adjudicator considered this
carefully alongside an increased offer
from the TCO in recognition of the poor
service, in particular the inappropriate
disclosure of information. The Adjudicator explained
to Mr and Mrs D that while payments of
compensation may appear low, the money
paid comes from the public purse and as
such must be considered proportionate to
the merits of each case.
The Adjudicator concluded that the
increased sum offered by the TCO was
reasonable.
Learning
The Adjudicator asked the TCO to issue a
notice to all staff:
- reminding them of the importance of
ensuring individuals’ papers are kept
separate from other claimants to avoid
letters becoming muddled; and
- that TCO staff should always review, in
detail, the information held for each
customer and keep promises to take
action
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Case Study 5: Underpayment of tax across
several years
Issues
Mrs E retired from a civil service
department in July 2002, at the age of
60, and started to receive a civil
service pension along with a state
pension.
Instead of setting up a record under the
civil service pension reference, one was
set up under an NHS pension reference, by
mistake. Although Mrs E contacted HMRC
twice in February 2003, and advised them
that she was receiving a pension from
the civil service and not the NHS, they
did not update their records.
This meant that coding notices were sent
to the wrong pension provider. Coding
notices were also issued directly to Mrs
E over a period of time still showing
incorrect information about the pension;
however, she did not contact HMRC again.
The mistake was not discovered until Mrs
E was sent a form P161 prior to her
approaching the age of 65.
A large underpayment of tax had arisen
across several years because the pension
provider operated an emergency tax code
and did not collect the correct amount
of tax.
Mrs E said that the tax underpayments
had arisen because of HMRC’s mistakes,
and she believed that they should not
collect the tax involved. HMRC accepted
that they had made mistakes; however,
they did not believe the underpayments
should be given up under the Extra
Statutory Concession A19, because they
considered that Mrs E could not
reasonably have believed her tax affairs
were in order when she continued to
receive coding notices with incorrect
details about her pension and provider.
Outcome
The Adjudicator substantially upheld
this complaint.
The Adjudicator said there was no doubt
that HMRC were at fault and had failed
to act on information supplied.
Mrs E was sent a payment in recognition
of HMRC’s poor handling and the Adjudicator
considered that this was a reasonable
resolution.
Learning
As formal assessments were not issued
within the statutory time limits, the
debts were not legally enforceable and
the tax outstanding could not be
collected.
HMRC should ensure that they follow
their internal instructions for these
types of cases as this meant that it was
no longer necessary to consider Extra
Statutory Concession A19.
This complaint could have been resolved
at an earlier stage.
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Case Study 6: Underpayment of tax
Issues
Mr F’s difficulties began when he
retired and took a part time job in
2003. His PAYE personal allowances were
duplicated for both sources of income.
In November 2006, Mr F received tax
calculations for 2004/2005 and
2005/2006, showing significant amounts
of tax owing. Mr F then instructed an
accountant who wrote to HMRC, but HMRC
took a long time to give a detailed
reply.
When HMRC did respond, they explained
that there were also arrears for
2002/2003 and 2003/2004 as it appeared
his employer at the time may not have
operated PAYE correctly. Later on, HMRC
decided that the employer had applied
PAYE correctly, so they asked Mr F to
pay the shortfall.
HMRC said that they could not give up
any of the arrears because, in their
view, Mr F should have known his tax
affairs were not in order.
Outcome
The Adjudicator partially upheld this
case and recommended that HMRC give up a
large proportion of underpaid tax.
The Adjudicator’s review of the
circumstances of Mr F’s case found that,
for the two earliest years there was no
evidence that HMRC’s failure to act on
information had caused arrears and
therefore the Extra Statutory Concession
ESC A19 did not apply.
For the two later years, however, the
Adjudicator recommended that HMRC should
not pursue the underpayments of tax as
it was not reasonable to assume that Mr
F should have been able to work out that
he had not been paying enough tax,
particularly as he had not received any
tax codes for those years.
Learning
Staff should put themselves in the
position of each individual taxpayer
when considering the “reasonable belief”
element of ESC A19.
It is only by appreciating the
customer's likely level of understanding
of tax, and not making general
assumptions, that staff will be able to
apply the concession fairly and
consistently for all of their customers.
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Case Study 7: HMRC Enquiry
Issues
Mr G complained that the request from
HMRC for him to sign a Contract
Settlement was premature as he had not
been given the opportunity to formally
appeal against the tax assessment and
interest charges raised by HMRC.
Mr G also complained about the quality
of the complaint
handling process and level of redress
offered by HMRC.
Outcome
The Adjudicator partially upheld this
complaint.
There was no evidence that HMRC had
given misleading advice or that they had
failed to refund tax which the
complainant felt had been overpaid.
However, the Adjudicator identified
failings in the way in which the Enquiry
into the Tax Return had been handled and
asked that the matter of interest be
referred to the appropriate HMRC
specialist unit.
HMRC set aside the Contract Settlement
and issued new assessments and
amendments giving Mr G an opportunity to
formally appeal.
Having considered the facts of the case
the Adjudicator did not recommend any
increase in redress already offered by
HMRC.
Learning
HMRC accepted there had been mistakes,
in particular by asking Mr G to sign a
Contract Settlement when it was clear
that Mr G had not agreed to all of the
terms of the contract.
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Case Study 8: Payment of interest on
refunded council tax payments
Issues
Mr H complained to the Adjudicator about
the VOA’s refusal to pay interest on
refunded council tax payments which he
had received because the council tax
band of his property had changed from
band E to D.
Mr H said “I believe it is clear that
the VOA made a mistake”.
Outcome
This case was mediated with Mr H on
behalf of the Adjudicator.
Our complaint investigator listened to
Mr H’s point of view and then clarified
the difference between a “judgment” and
a “clear mistake” when making a property
banding decision.
He explained that, under the terms of
the VOA’s own guidance, they will only
award compensation to cover lost
interest where there is clear evidence
of a mistake or a delay. Our remit only
extends to reviewing whether or not a
department has followed its own
guidance, and does not extend to
criticising the guidance itself.
We found no
evidence to suggest that the initial
banding was a clear mistake in this
case. When the property was initially
banded there was no clear sales evidence
on the complainant’s property or a neighbour’s property, and so the Listing
Officer (the LO), who has the statutory
responsibility for council tax bands,
had to make a judgment based on the
information available.
This information seemed to show that the
properties were border-line between
bands D and E, and as Mr H’s property
had a good quality conservatory, the
LO decided band E was more
appropriate for his property whilst
placing his neighbour in band D.
A different decision was reached when Mr
H asked for a review of the band, again
demonstrating that an element of
judgment is exercised when considering
bands which are border-line.
In light of the discussions with our
investigator, Mr H accepted that the
VOA’s decision not to award compensation
in lieu of lost interest was in line
with its own guidance, and the case was
closed on that basis.
We did not see any areas of concern with
how Mr H’s complaint was handled.
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Case Study 9: Claim for interest and
agents fees
Issues
The VOA had previously acknowledged that
a mistake was made in the compilation of
the 2000 Rating List and that, as a
result of duplicated entries, Mr I was
overcharged business rates by £40,205.
The VOA accepted that they had made a
mistake and settled this aspect of Mr
I’s complaint before the case came to
the Adjudicator.
However, the VOA did not agree that they
should pay interest on the amount
refunded to Mr I; neither should his
agent's fees be met. The VOA felt there
were opportunities for Mr I to mitigate
the losses by carefully examining his
rate demands and that he should have
realised that he was being charged twice
for his business.
Furthermore, there had been
opportunities for Mr I to appeal against
the duplicated entries during the
lifetime of the Rating List.
Mr I was unhappy with the VOA’s decision
and his agent asked the Adjudicator to
review it.
Outcome
The Adjudicator substantially upheld
this complaint.
The Adjudicator decided that the VOA’s
acceptance of responsibility for the
mistake should also take into account
the interest and professional fees
incurred by Mr I in bringing his
complaint. The overriding principle of
the VOA’s Code of Practice, “Putting
things right for you” is to restore
taxpayers and ratepayers to the position
they would have been in, had the mistake
not occurred.
The VOA code does not mention payments
of interest on refunded business rates
payments. Usually, these are the
responsibility of the local Billing
Authority (BA) as there is scope, within
the Non- Domestic Rating Legislation, to
make payments of interest on refunds
which are the result of reductions in
rateable values.
However, the duplicated entry in the
2000 Rating List could not be amended or
deleted: leaving no vehicle for the BA
to consider a claim for interest.
The Adjudicator did not accept that the
interest should be paid at the 8% level
being claimed by Mr I. Instead she
recommended that the interest should be
calculated using the prevailing rates
applied by legislation so that Mr I
would be no better or worse off than if
he had received the refund directly from
the BA. The VOA agreed to pay the
interest.
The Adjudicator also recommended that
the VOA considered the claim for
professional fees. The code of practice
says that a complainant “...can claim
any reasonable costs which you can show
you have incurred” as a result of a
mistake or unreasonable delay caused
directly by the VOA. On reflection, the
VOA also agreed to refund Mr I’s agent
fees.
Learning
The Adjudicator emphasised the need for
consistency in complaint handling and
felt that the VOA had not applied the
code of practice appropriately.
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Case Study 10: Misleading advice and
failure to act
Issues
Mr J had been made bankrupt in early
1999 and had a personal pension which
formed part of his estate. Mr J
complained that The Insolvency Service
(IS) had misled him about when they
would realise his pension policy.
The IS wrote to Mr J in September 2004,
and they confirmed that they would
realise his pension policy and the first
five years of annuities. They also
explained that once this had been done
they would have no further interest in
the pension policy and any further
annuities would be paid directly to Mr J
by the pension company. This was the
standard way of dealing with pensions of
this nature. If the pension policy had
been realised in 2004, Mr J would have
begun to receive annuities in 2009.
However, the pension policy was not
realised in 2004, and The IS were unable
to give a reason as to why this was not
done.
Mr J said that he was unhappy that The
IS did not realise his pension policy in
2004 and because of the delay, he would
not receive any annuities until 2014 at
the earliest, five years later than he
had been led to believe.
Outcome
The Adjudicator substantially upheld
this complaint.
In recognition of this error, The IS
agreed to give up the five years of
annuity payments that they would
normally collect from the pension policy
and offered monetary compensation
(redress) for their poor handling.
They also took appropriate steps to
realise the pension policy which means
that Mr J will now start to receive
annuities, the position he would have
been in if this had been done in 2004.
Redress payments are not direct
compensation. In the Adjudicator’s view,
no amount of money can ever directly
compensate Mr J for the worry and
distress that he suffered as a result of
the way that his case was handled.
However, she views such payments as a
clear acknowledgement by The IS of the
distress they caused.
The Adjudicator felt the compensation
offered by The IS, as a result of Mr J’s
complaint, was reasonable and she did
not recommend the amount be increased.
Learning
Mistakes or delays need to be minimised,
or where they do arise, addressed
quickly to avoid causing worry, distress
and financial hardship to the
individual.
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Case Study 11: Bankruptcy
Issues
Mr K complained about how The IS had
handled certain aspects of his
bankruptcy.
He told the Adjudicator that The IS had
wrongly advertised that he owned a
business when he did not. He said that
this caused offence to the actual owner,
which led to Mr K losing his home and
job.
He also complained that The IS extended
the term of the bankruptcy from five to
eleven years without informing him, and
there were other handling issues.
Outcome
The Adjudicator did not uphold this
complaint.
The investigation considered all of the
available evidence from the customer and
The Insolvency Service.
The Official Receiver has no involvement
with the creation of a bankrupt’s
description as it appears in a
bankruptcy order. The petitioning
creditor is required to provide the
court with a description to identify the
bankrupt and this is done prior to a
court order being made.
When the Official Receiver is notified
of a new bankruptcy, he or she has a
statutory duty to advertise the
bankruptcy as soon as possible. Only
after the bankrupt had been interviewed,
could it be reasonably expected that The
IS could amend the description, which
was done in this case.
Although the Adjudicator sympathised
with Mr K’s situation she did not
believe it was reasonable to blame The
IS for the description in the bankruptcy
order. Nor could she reasonably hold The
IS responsible for the actual owners’
reaction. The advertisement made
no suggestion that Mr K was the owner of
the business; it only described it as
his place of residence, which was
correct at the time.
Mr K’s complaint concerned the handling
of a bankruptcy order made in 1998, but
his complaint that The IS extended the
term of that bankruptcy from five to
eleven years without informing him arises
from the effects of an earlier
bankruptcy.
Mr K had been subject to another
bankruptcy before 1998 and the law in
1998 stated that there was no
entitlement to an automatic discharge
from his second bankruptcy.
To obtain discharge, a bankrupt was
required to make application to the
Court, at least five years after the
date of the bankruptcy order. In April
2004, the law regarding bankruptcy
changed. As a result of these changes,
an individual subject to a second
bankruptcy, prior to 1 April 2004, would
get an automatic discharge on 1 April
2009.
Mr K had made no application to the
Court for discharge at any stage; but he
was automatically discharged from
bankruptcy on 1 April 2009. The
Adjudicator did not agree that The IS
had taken any steps to extend the term
of Mr K’s bankruptcy.
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