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Selected Cases and Summaries of Completed Investigations - April to September 2000
Volume 3 - 3rd REPORT - SESSION 2000-2001
Chapter 2
INLAND REVENUE
Case No: C.172/99
Alleged unfair and prolonged investigation; unreasonable denial of access to records and breach of confidence
A tax inspector began an investigation into the affairs of Mr R and his company in August 1994. That was eventually concluded after appeal commissioners determined appeals in March 1997. Meanwhile in July 1996 Mr R made specific requests for copies of correspondence between the inspector and his accountants, from whom he had withdrawn instructions in May 1995, and for other information. It was not until after Mr R formally complained in 1997 that the Revenue accepted that the inspector had been wrong not to release documentation. The Adjudicator also upheld that complaint and held that the inspector had breached Mr R's confidence by letting the accountants know, in a telephone conversation in August 1996, of Mr R's declared plan to take legal action against the accountants. The Adjudicator concluded that the breach had not harmed Mr R. The Ombudsman did not criticise the inspector's main handling of the investigation, nor the decision to begin it. He did not accept that departmental maladministration had caused Mr R's business to close. He was critical of the inspector's refusal to provide copy correspondence to Mr R but noted that Mr R did not pursue that matter before the appeal commissioners when he had two opportunities to do so. The Ombudsman concluded that there had been a breach of confidence in August 1996, contrary to Revenue instructions, and that the test of "harm done" was irrelevant. The Revenue agreed to make a consolatory payment of £100 to Mr R and £500 to meet his additional costs.
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Case No: C.1477/99
Delays and mishandling of an investigation involving capital gains tax liability
Mr X complained that the Revenue had mishandled an investigation which had involved the taxation consequences of the disposal of a house which had been partly let. He contended that inadequate redress had been provided when the Revenue had accepted they had made errors. The Ombudsman found no fault in the Revenue initiating their investigation but found that the inspector had handled confidential information given by Mr X inappropriately, and had not been open-minded when considering evidence presented on Mr X's behalf. The investigation had been unnecessarily protracted. In response to the Ombudsman's request to consider again financial redress, the Revenue agreed to increase the total ex gratia compensation offered to Mr X by £1,450 (making £6,500 in all). They also offered to examine Mr X's costs further, should there be genuinely new evidence.
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Case No: C.484/00
Refusal to make an ex gratia payment to compensate for tax overpaid
Mr M received the married man's allowance up to and including 1985/86. The Revenue have no records for the following year but from 1987/88 Mr M received only the allowance for an unmarried man although still married. No records existed to show why the allowance stopped. In May 1997 Mr M claimed the married man's allowance and in November the Revenue repaid overpaid tax for the tax years 1991/92 to 1996/97. The earlier years were outside the statutory limit for repayment purposes; and, after further investigation, the Revenue refused to apply their Extra Statutory Concession B41 to allow further repayment on the grounds that there was no evidence that they had been at fault. After the Ombudsman's intervention the Revenue decided, in the interests of fairness, to make repayment to give effect to the married man's allowance for 1986/87 to 1990/91 . They also agreed to meet the cost of two reminder letters which Mr M's solicitors had had to send because of delays in handling correspondence.
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Case No: C.686/00
Poor handling of an investigation and later tax affairs
The Ombudsman concluded that the decision of the Revenue to open an investigation into Mr A's tax affairs was taken without maladministration. However, he concurred with the Revenue Adjudicator that the investigation was poorly handled. Once the Revenue's investigation had been completed they failed to reference properly some later correspondence, but otherwise handled the post-investigation stages of Mr A's case without maladministration. The Revenue paid Mr A the compensation the Adjudicator had recommended and apologised to him for their poor handling of his case. The Chairman of the Board of Inland Revenue offered his further apologies and said the Revenue would amend leaflet IR121 to ensure its wording on the use of references in correspondence matched the Revenue's practice in that area. The Ombudsman considered that to be suitable redress for the errors in the Revenue's handling of Mr A's case.
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Case No: C.901/00
Alleged unfair tax treatment surrounding a sale of property by a trust
Mr B complained that the Revenue had refused to accept a valuation agreed for the co-owner's share of land until, after a considerable delay, they decided not to press for an alternative valuation. The Ombudsman decided that the inspector handling the disposal by trustees had acted properly in accordance with internal instructions in consulting the District Valuer for a valuation; and that the inspector handling the co-owner's disposal had been wrong in accepting the submitted valuation without such consultation. Although he identified some relatively minor mishandling, the Ombudsman did not uphold the main complaint that maladministration by the Revenue had caused Mr B to incur unnecessary professional costs. Nor did he consider that Mr B had been treated unfairly in terms of the Taxpayer's Charter.
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Case No: C.1034/00
Late issue of tax statements and failure to explain the operation of self assessment
The Revenue failed to address fully Mr A's concerns about what he saw as delays in seeking his payment of income tax and failed to provide him with a proper explanation of the operation of the self assessment system. The Revenue recognised, and apologised for, their poor attempts to address those concerns. They offered to meet Mr A's postal costs in pursuing his case. They also introduced changes to the system and reworded notes on guidance.
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Case No: C.1111/00
Reduced payments of tax on account
For the tax year 1996/97, a transitional year for Self Assessment, Mr Y made a claim to reduce his payments of tax on account. In due course Mr Y became liable for more tax due and incurred a penalty charge of £21.44 for late payment. He complained that the Revenue had failed to inform him properly and that they gave him confusing explanations when he tried to have the penalty rescinded. The Ombudsman decided that the Self Assessment regime placed more responsibilities on individual taxpayers to understand the implications of their actions. He found that a Revenue explanatory leaflet, which had been sent to Mr Y, gave adequate warnings to taxpayers minded to make reduced payments on account. He did not uphold the complaint.
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