Mrs B's complaint about HM Revenue & Customs
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HM Revenue & Customs’ failure to record receipt of an annual declaration led to Mrs B going for nearly three years without money to which she was entitled and being taken to court for a debt she did not owe. Mrs B got into debt and sold household items to make ends meet. She was ‘driven to her wits’ end’ by HM Revenue & Customs’ action.
Background
Mr and Mrs B were in receipt of tax credits. In May 2005 HM Revenue & Customs (HMRC) sent them their annual declaration for 2004-05 to complete and return, followed by a reminder on 6 September. Mrs B returned it, along with P60s, childcare details for their three children, and a covering letter, by the deadline of 30 September. HMRC’s records show that on 18 October they attempted to amend Mrs B’s address and childcare details. (HMRC told us a mistake was probably made when this information was being manually input, as a result of which the system did not record receipt of Mrs B’s declaration.) As HMRC had no record of receiving the declaration, they stopped Mrs B’s tax credits from 18 October and said she had been overpaid (from 6 April).
On 24 October 2005 Mrs B telephoned the Tax Credit Helpline (the Helpline) saying she had returned the declaration with her P60s. They told Mrs B that if she called back with her P60 details before 1 November they would reinstate her payments. Mrs B immediately posted copies of the declaration and P60s, with a letter providing her new address from 25 November. HMRC have no record of receiving them. The next day Mrs B received an award notice asking for details of her and her husband’s actual income for 2004-05 by 31 January 2006. She was unconcerned by this letter as she had posted the details the previous day. On 4 January 2006 a system-generated letter was sent to Mr and Mrs B’s previous address, thanking them for making their 2004-05 declaration. The letter said that Mr and Mrs B had provided their estimated income, when HMRC required their actual income, and that if HMRC did not receive it by 31 January their 2004-05 award would be finalised based on the estimated income. (This letter did not show up on Mrs B’s tax credit record, and so officials were unaware of it.) On 16 January the Debt Management and Banking Unit (the Unit) wrote to Mrs B at her new address about the overpayment (of £1,722.96). On 23 January Mrs B faxed the Unit a copy of her declaration, saying that she had sent it in before the deadline and had since forwarded copies.
HMRC sent Mr and Mrs B award notices in February 2006 finalising the 2004-05 award, based on the details they already held (because they said they had not received details of their actual income). Mrs B telephoned the Unit and their recovery section but HMRC have no record or note of these calls. In April the Unit told Mrs B that if she did not deal with the overpayment immediately, they would consider legal action. In May Mrs B submitted another copy of her declaration, her husband’s P60 and her payslips. She explained that she had sent in her declaration and P60s by 30 September 2005 and had sent copies since. She pointed out that she had also sent copies on 24 October 2005 with details of her new address from 25 November: as she had not written again until 23 January 2006, HMRC must have received the documents because they had used her new address when writing to her on 16 January. HMRC replied by sending Mrs B a new claim form.
In June 2006 an officer from the Unit told Mr and Mrs B that he would visit them to talk about repaying the overpayment, otherwise he would consider legal action. Mrs B telephoned the Unit and then the Helpline, saying she had sent her declaration to HMRC several times. The adviser said she would send Mrs B a disputes form and recovery of the overpayment would be ‘put on hold’. (It was during this call that Mrs B understood for the first time that HMRC had stopped her payments because they thought she had not completed the 2004-05 declaration.) Mrs B completed the disputes form. In September Mrs B made a formal complaint and in October HMRC told her that the overpayment remained recoverable and that ‘we do not hold any records of calls or letters made to the tax credit helpline regarding this matter’.
In November 2006 the Unit told Mrs B they would start legal proceedings if the overpayment was not repaid. She telephoned the Unit and spoke to an officer who said that the family details and childcare costs had been updated on 27 September 2005 with information that could only have come from her declaration. He said he could do nothing and advised Mrs B to contact the Helpline. Mrs B told us that she spoke to many people in several departments, all with different databases and all saying that they could not see how things had got that far. No one could help her. She said she telephoned the officer again and that he had told her that the legal proceedings would be stopped.
Despite that, Mrs B received a county court summons for a hearing in March 2007. The judge advised her to ask HMRC for further information (which she did) and adjourned the hearing until May. In their reply to Mrs B, HMRC said they could find no record of her telephoning the Helpline between October 2005 and May 2006, and no record of receiving her declaration. The May hearing was adjourned until July. In the meantime, Mrs B requested recordings of specific telephone calls to the Helpline. HMRC sent Mrs B a compact disc of recordings, but not of the calls she had requested. Meanwhile, on 30 May the Unit told Mrs B that HMRC had received the declaration; the problem related to the use of estimated income rather than non‑receipt of the form. At the July hearing HMRC produced a certificate of debt, but the judge stayed enforcement for three months, which allowed Mrs B time to approach the Ombudsman. Mr and Mrs B repaid the ‘overpayment’ and paid £110 court costs to avoid having a county court judgment against them.
What we investigated
We investigated Mrs B’s complaints that HMRC had: lost or failed to act upon information she had provided; failed to respond to her questions and complaints; resorted to court proceedings when they had told her they would not do so; wrongly refused to reinstate her tax credits; and given conflicting advice about the information they required, the cause of the overpayment and how to reinstate her award.
Mrs B said she had been put to considerable time and trouble, incurred out-of-pocket expenses and sustained severe distress as a result of HMRC’s mistakes. She wanted HMRC to pay her the tax credits she believed she was entitled to.
What our investigation found
On the day that HMRC tried to amend Mrs B’s records, they created a note that referred to the childcare details she had told them about. We therefore had no reason to doubt that HMRC had received Mrs B’s declaration, and that this was before 30 September 2005. HMRC did not properly input the details from that declaration, causing the computer system to wrongfully terminate Mrs B’s claim, and creating the ‘overpayment’. We were also satisfied that HMRC received the documents Mrs B sent them on 24 October, and had received them before the new deadline of 1 November. Although a system-generated letter acknowledged receipt of the declaration, officials were unaware of it.
Those errors were compounded by a complete lack of customer focus. HMRC gave Mrs B inaccurate advice, and their failure to make accurate and adequate notes of calls was not in keeping with the Principle of ‘Being open and accountable’. While Helpline advisers cannot be expected to make verbatim notes of every call, they should keep accurate and appropriate records sufficient to enable HMRC to take reasonable decisions based on all relevant considerations. We were not persuaded by HMRC’s position that notes of calls are unnecessary; in our experience it is not always possible to trace the recordings when needed and HMRC do not regard them as the primary record. HMRC’s failure to interact critically with the computer system meant they lost sight of their customer: they did not question whether the absence of a computer record of the declaration meant no declaration had been received, or that one had simply not been recorded. They also missed many opportunities to assemble and review the evidence and quality assure their actions.
HMRC failed to ‘put things right’ when Mrs B complained, treating her complaint as a dispute about the overpayment. Mrs B said that when she telephoned the Unit in November 2006, she was told the legal proceedings would be stopped. Although neither party has a note of the call, Mrs B’s recollections (which were generally reliable) were vivid. We thought it more likely that HMRC did give her the impression that the legal proceedings would be stopped.
In summary, HMRC’s handling of Mrs B’s tax credits claim and her subsequent complaint fell so far short of the standards in the Ombudsman’s Principles of Good Administration as to constitute maladministration.
Consequences
HMRC’s mistakes caused Mrs B and her family a significant injustice. They went without their tax credits entitlement for around three years, got into debt, and sold household items in order to make ends meet. They were wrongly pursued at great length for an overpayment and endured the strain of three court hearings. By Mrs B’s account, she wrote letters and made telephone calls most days, to no avail. She felt at her wits’ end, argued with her husband, and spent time dealing with tax credits which should have been family time.
We upheld Mrs B’s complaint.
Resolution
During our investigation, HMRC acknowledged their mistake and agreed to restore Mrs B’s claim by calculating her entitlement from 2005-06 to 2008-09. They also proposed to pay her £150 for worry and distress, £20 to cover her costs, and £110 to reimburse the court fees. Although those actions were welcome, they did not fully remedy the injustice to Mrs B and so we recommended that HMRC:
- arrange for a senior officer to send Mr and Mrs B a written apology which explicitly acknowledged that they did not owe HMRC money and that legal proceedings should never have been taken against them; and
- pay them £5,000 compensation for distress, inconvenience and financial loss, and reimburse their £110 court costs.
We also asked HMRC to tell us what they will do to try to ensure that future cases similar to that of Mr and Mrs B’s do not end up in court.
HMRC accepted our recommendations.
