Home > Publications > Selected cases — Parliamentary > Selected Cases and Summaries of Completed Investigations - October 2000 to March 2001 - Case No. C.1086/97, C.673/99, C.1656/00, C.1862/00, C.1912/00, C.151/01, C.1419/00, C.1661/00, C.1804/00, C.1889/00 and C.430/01
Selected Cases and Summaries of Completed Investigations - October 2000 to March 2001
Volume 4 - 2nd REPORT - SESSION 2001-2002
Chapter 2
INLAND REVENUE
Case No: C.1086/97
Discriminatory enforcement of National Insurance liability and refusal of a refund by the then Contributions Agency
Mr E complained on behalf of company M that a decision by the then Contributions Agency in 1993 to waive arrears of national insurance contributions due on the value of petrol supplied in 1989/90 and 1990/91 at the expense of employers for the private use of their employees, put at a commercial disadvantage those employers, such as company M, who had already settled their lawful liability; and that the Contribution Agency’s refusal in 1995 to refund company M unfairly discriminated against the company. The Ombudsman found that the Contributions Agency should have sought counsel’s advice in 1991 before enforcing the national insurance contributions liability on those employers who had paid for petrol by credit or agency card while not enforcing it against those who had paid by voucher, particularly since an earlier court judgment was that there was no distinction in liability. Following the Ombudsman’s intervention, the Inland Revenue, of which the Contributions Agency had become part in April 1999, took fresh advice from counsel. That advice was that it was legitimate to distinguish, as regards enforcement of the national insurance contributions liability, between employers who had paid for petrol by vouchers and those who had paid by credit or agency cards. In the light of that advice the Ombudsman concluded that the Contributions Agency’s maladministration in 1991 had not led to an injustice to company M, since they were asked to pay no more than their legal liability. The Ombudsman accepted that there was no legal or administrative basis for the Inland Revenue to refund the sum that company M had paid in national insurance contributions. However, the Ombudsman criticised the then Contributions Agency for serious delay in considering company M’s request for a refund, for which the Chairman of the Board of Inland Revenue apologised on behalf of the Department of Social Security. The Chairman also apologised for the sense of unfairness understandably felt by Mr E.
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Case No: C.673/99
Refusal to apply a House of Lords’ decision and subsequent handling of the complaint by the adjudicator
Mr S was a participant in a tax avoidance scheme. The Inland Revenue (the Revenue) had told his accountants that the appeal of another taxpayer would be a ‘test case’ for him. That other appeal (Case A) was decided by the House of Lords in November 1979 in favour of the taxpayer. The Revenue had then answered a query from professionals acting for participants in the avoidance scheme saying that the decision in Case A was of general application. However, in March 1981 the House of Lords, while not overturning Case A, decided another case (Case B) establishing new legal principles which had a bearing on Mr S’s appeal. The Revenue refused to apply Case A. Mr S’s appeal itself eventually came before the House of Lords in February 1993: they found for the Revenue, but said that the facts in Mr S’s case could not be distinguished from Case A. The Revenue subsequently refused to apply Case A. An accountant complained on behalf of Mr S to the then Adjudicator, who initially upheld a substantial part of the complaint but then changed her mind when the Revenue contested her decision pointing to correspondence which indicated that those involved with the avoidance scheme had been aware before Case B had been decided that the Revenue would not automatically apply Case A to those in Mr S’s position.
The Ombudsman found that the House of Lords had decided Mr S’s tax liability arising from his participation in the avoidance scheme – that was not a matter for him. He found failings by the Revenue and a misconceived approach by the then Adjudicator. But he did not find that those had led to an unremedied injustice for Mr S. Put simply, events in his case had been overtaken by Case B and no blame attached to the Revenue for that.
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Case No: C.1656/00
Determination of self-employment
Mr Q complained that the Revenue acted maladministratively in making a direction under Regulation 42(2) of the Income Tax (Employment) Regulations 1993 to recover tax due on the income he received prior to 1 January 1997, from his employers. He had no right of appeal against such a direction except by way of judicial review. He also complained that the Revenue treated him differently compared with the other employees.
The Ombudsman found that, although there had been maladministration, Mr Q, because of his own actions had suffered no loss or injustice. He did not consider it appropriate to invite the Revenue to consider a consolatory or other ex gratia payment for Mr Q. He found no evidence that the Revenue had treated Mr Q differently from the other employees. The Revenue decided, in the light of the Ombudsman’s findings, to take no further action to enforce the regulation 42(2) direction against Mr Q.
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Case No: C.1862/00
Failure to advise of shortfall in additional pension entitlement and misdirection
In 1979 and 1983 the Contributions Unit (then part of the Social Security Agency in Northern Ireland, and now part of Inland Revenue) routinely inspected the national insurance and payroll records of Mr X’s employer. Neither inspection revealed anything untoward. Following a third inspection in 1985, the Unit directed the employer to change the method used to assess Mr X’s liability for national insurance contributions from April 1986 (so as to increase his future payments). Mr X asked the Unit about the implications of the direction for his additional pension. He says the Unit led him to believe that the direction applied retrospectively, and assured him they would collect the arrears of national insurance contributions produced retrospectively, thus boosting the value of his additional pension (there were no arrears), or act in some other way to increase its value. Unbeknown to Mr X the Unit, correctly, took no such action because the direction had not applied retrospectively. In 1998 Mr X queried the unexpectedly low rate of additional pension shown on a state pension forecast and learned that, contrary to what the Unit had allegedly told him in 1986, they had not acted to increase its value. The Ombudsman did not uphold Mr X’s complaint that the Unit should have told him that the way in which his employer had assessed his national insurance contributions before 1986 had affected his additional pension. The Ombudsman was unable to establish if the Unit had misled Mr X in 1986. In recognition of various handling errors the Unit and Inland Revenue made Mr X consolatory payments totalling £337.
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Case No: C.1912/00
Unauthorised disclosure of confidential information
Mr F complained that Mr H, an Inspector of Taxes at the Inland Revenue, acted maladministratively when he disclosed, information about Mr F’s tax affairs to Mr F’s business associate without his authority or consent. Mr F also complained that, as a consequence of Mr H’s breach of confidentiality his business associate withdrew support for a finance business which Mr F was trying to build up, with the result that the company ceased to trade and Mr F was made redundant.
The Ombudsman found it probable that an improper disclosure did take place and regarded as suitable the Revenue’s apology and their offer to pay Mr F £2,000 in respect of the serious error, the time taken to bring the case to a conclusion, and relevant expenses.
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Case No: C.151/01
Determination of self-employment
Ms P complained that the Revenue failed to refund her the income tax which she had previously paid on her earnings as a self-employed person for the income tax years 1991/92 to 1995/96. She also complained that the Revenue failed to make a determination under Regulation 49(2) of the Income Tax (Employment) Regulations 1993 on her former employers to recover from them the income tax and Class 4 national insurance contributions due on her earnings.
The Ombudsman found that the Revenue had erred. He regarded the Revenue’s decision to: refund to Ms P the amounts of income tax and Class 4 national insurance contributions overpaid for the years 1991/92 to 1995/96; apologise for the delay in resolving the matter; make a payment of £50 costs and a £50 consolatory payment; and consider a further claim for any additional reasonable costs arising directly from their serious error to be a satisfactory outcome to a partly justified complaint.
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Case No: C.1419/00
National Insurance Contributions Office: late payments of minimum contributions to a private pension provider associated with the introduction of a new computer system
Mr D complained that the National Insurance Contributions Office of the Inland Revenue delayed payment of his minimum contributions to his private pension provider and failed to compensate him adequately for the loss to his pension fund. The Department of Social Security, who then had the operational responsibility, recognised that their new National Insurance Recording System, known as NIRS2, was failing to ensure timely payments into the pension funds of those individuals who had opted out of the state earnings-related pension scheme. Department of Social Security Ministers approved a scheme to pay in with the minimum contributions a fixed rate of compensation for each month late after October 1998. That scheme was to operate only for the 1997/98 contributions year. Mr D was able to show, notwithstanding the compensation he received, that he had suffered a financial loss of £28.80 within his pension plan because the pension provider had been unable to invest units at the right time, in a rising stock market. After the Ombudsman’s involvement the Chairman of the Board of Inland Revenue accepted that the delays associated with the late introduction of NIRS2 could be regarded as having arisen through maladministration. The Revenue agreed to compensate individuals who could demonstrate that they had suffered a financial loss of £50 or more. In the light of that limit, which the Ombudsman agreed as being reasonable, the Revenue will not be making a further payment to Mr D.
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Case No: C.1661/00
National Insurance Contributions Office: late payments of minimum contributions to a private pension provider associated with the introduction of a new computer system
Mr T complained that the National Insurance Contributions Office of the Inland Revenue delayed payment of his minimum contributions to his private pension provider and failed to compensate him adequately for the loss to his pension fund. The Department of Social Security, who then had the operational responsibility, recognised that their new National Insurance Recording System, known as NIRS2, was failing to ensure timely payments into the pension funds of those individuals who had opted out of the state earnings-related pension scheme. Department of Social Security Ministers approved a scheme to pay in with the minimum contributions a fixed rate of compensation for each month late after October 1998. That scheme was to operate only for the 1997/98 contributions year. Mr T was able to show, notwithstanding the compensation he received, that he had suffered a real financial loss within his pension plan because the pension provider had been unable to invest units at the right time, in a rising stock market. After the Ombudsman’s involvement the Chairman of the Board of Inland Revenue accepted that the delays associated with the late introduction of NIRS2 could be regarded as having arisen through maladministration. He agreed to make a payment of £288.79 to Mr T accordingly. The Revenue also agreed to compensate others who could demonstrate that they had suffered a similar financial loss of £50 or more.
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Mr D had been refused contributions-based jobseeker’s allowance because of incomplete national insurance contributions for the relevant tax years. Mr D subsequently had a number of exchanges with the Revenue’s National Insurance Contributions Office. After the Ombudsman’s involvement the National Insurance Contributions Office accepted that they had made a number of errors. They had given Mr D incorrect information, failed to supply him with a number of records and failed properly to act on information supplied by Mr D. The National Insurance Contributions Office made Mr D a consolatory payment of £150 and undertook to refund a further £9.50 shown in his national insurance account as owing. They also agreed to consider any claim Mr D might wish to make concerning his out-of-pocket expenses. The Ombudsman’s intervention also showed that the National Insurance Contributions Office needed to reach a formal determination of Mr D’s national insurance so that he could pursue outstanding queries about benefit entitlement. They undertook to deal with that outstanding matter quickly. The Ombudsman found no grounds for criticising the Employment Service.
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Case No: C.1889/00
National Insurance Contributions Office: late payments of minimum contributions to a private pension provider associated with the introduction of a new computer system
Mr G complained that the National Insurance Contributions Office of the Inland Revenue delayed payment of his minimum contributions to his private pension provider and failed to compensate him adequately for the loss to his pension fund. The Department of Social Security, who then had the operational responsibility, recognised that their new National Insurance Recording System, known as NIRS2, was failing to ensure timely payments into the pension funds of those individuals who had opted out of the state earnings-related pension scheme. Department of Social Security Ministers approved a scheme to pay in with the minimum contributions a fixed rate of compensation for each month late after October 1998. That scheme was to operate only for the 1997/98 contributions year. Mr G was able to show, notwithstanding the compensation he received, that he had suffered a real financial loss within his pension plan because the pension provider had been unable to invest units at the right time, in a rising stock market. After the Ombudsman’s involvement the Chairman of the Board of Inland Revenue accepted that the delays associated with the late introduction of NIRS2 could be regarded as having arisen through maladministration. He proposed to make a payment of £179.23 to Mr G accordingly. The Revenue also agreed to compensate others who could demonstrate that they had suffered a similar financial loss of £50 or more.
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Case No: C.430/01
Valuation Office Agency: mishandling of a council tax appeal
Ms A complained that as a result of maladministration by the Valuation Office Agency of the Inland Revenue, she was unable to present a full and appropriate case to the Valuation Tribunal that heard her appeal against the council tax banding of her property. She complained that the Valuation Office Agency’s failure to pass on her misdirected appeal against the Valuation Tribunal’s decision meant that her appeal was not received by them within the statutory time limit.
The Chief Executive apologised for the Valuation Office Agency’s errors and offered a payment of £25 to cover the additional costs Ms A had incurred as a direct result of their handling of the appeal and a consolatory payment of £100 for the worry and distress she had been caused.
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