Home > Publications > Selected cases — Parliamentary > Selected Cases and Summaries of Completed Investigations - October 1998 - March 1999 > Inland Revenue
Sixth Report Session 1998-99
Volume 2
OCTOBER 1998 - MARCH 1999
The full report of selected cases
Summary of other investigations completed
INLAND REVENUE
Delays in resolving a taxpayer's liabilities
Mrs N was the director of a limited company and had earlier been self employed. Her then accountants did not send the Revenue her tax returns at the proper time, nor did they operate PAYE for the company in respect of her emoluments. Over many years various tax offices, Mrs N and those acting for her corresponded in an effort to resolve her and the company's outstanding tax liabilities, but by September 1992 matters relating to the failure of the company to account for PAYE had still not been resolved and Mrs N had not been given the comprehensive explanation she had long sought. Two payments made could not be traced and the Revenue gave credit for those. Correspondence continued for an extended period on payment reconciliations and on the mitigation of interest due. The Ombudsman found that Mrs N, her then accountants, and the company were partly at fault in respect of the delayed returns and PAYE failure but that there were some errors and considerable delays on the Revenue's part, particularly in giving Mrs N and her adviser the explanations and reconciliations they had sought. The Revenue apologised for their poor handling of Mrs N's tax affairs; they said they would waive some interest; consider a claim for the costs incurred by Mrs N in bringing her tax affairs up to date since 3 June 1992; make a consolatory payment of £250; and provide a clear explanation of how various liabilities arose, the payments which had been made and how they had been allocated. That provided a suitable outcome.
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Handling of PAYE arrears
A husband and wife were directors of a company which failed to comply with PAYE regulations. The Inland Revenue addressed that failure ineffectively and delayed in giving the company and the husband and wife clear information on the amounts outstanding and the allocation of payments made. There was lengthy correspondence with various tax offices. The Revenue made regulation 29 determinations and Schedule E assessments. After a meeting at a tax office the husband and wife thought that all matters involving them and their company had been resolved but at that meeting the Revenue had omitted to raise an outstanding regulation 29 liability. When the Revenue pursued the company for that the husband and wife complained. The Ombudsman found delay and shortcomings in the Revenue's handling of matters. The Revenue apologised for that; agreed to reimburse the full costs incurred in establishing what had happened to two missing payment cheques; undertook to review an interest charge on a regulation 29 determination; and said they would consider whether any further redress was due to the husband and wife within the terms of their code of practice.
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Delay by the Valuation Office Agency (VOA) in correcting an error in the non-domestic rating list
In January 1992 the local valuation office (LVO) of the VOA told Ms J that her proposal for an alteration to an entry in the rating list which recorded the existence of business premises and a flat was not valid as the circumstances she had described, the lack of a flat at the premises, were not regarded as a material change. After the intervention of the local council, LVO amended the entry in August 1993 and notified Ms J in October. Meantime, after inspecting the premises, LVO had told Ms J in September that its rateable value would rise backdated to 1 April 1992. In November the council sent Ms J a bill for the arrears of non-domestic rates but she said she was unable to meet the additional cost and closed her business. The Ombudsman found that the LVO's failure to act on the information provided by Ms J in 1992 had led to her being notified much later than she should have been of her revised rates liability. That had prevented her from budgeting for her increased outgoings. VOA paid Ms J £315 to cover her out-of-pocket expenses, her solicitor's costs and a consolatory payment. The Chief Executive of VOA also agreed a further payment of £180, as an acknowledgement that the case had not been handled well.
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Delay in determining tax status
Mr D's income from work in the film industry had been assessed on the basis that he was self-employed (schedule D). In the early 1980s the Revenue endeavoured to have the industry apply PAYE to those in Mr D's position. Mr D then provided his services through a service company, and the Revenue agreed to not challenge the legitimacy of that arrangement for the period up to 5 April 1988 if thereafter Mr D would agree to a split Schedule E/Schedule D basis of assessment. Mr D wanted schedule D treatment. The matter remained unresolved. In February 1992, after Mr D had appealed, the General Commissioners decided in principle which elements of his work constituted employment and which self-employment. There was further dispute on the application of the Commissioner's decision but the Revenue agreed, in October 1992, to grant schedule D treatment after 30 April 1988. Mr D then disputed the Revenue's calculations of tax owed and it was not until October 1996 that he paid all the arrears assessed by the Revenue. The Ombudsman found that some delay had occurred while the outcome of a complaint Mr D had made to the Adjudicator was awaited and that there had been some shortcomings, but, in the main, the delays were a result of the complexity of Mr D's tax affairs.
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Delay in concluding an accounts investigation
The Revenue carried out two separate investigations into Mr G's accounts, spanning 1986 to 1994. During that time they mislaid one set of accounts for almost two years. Mr G was unable to attend to his affairs for much of 1991 and 1992 because of ill health. After the Ombudsman's intervention the Revenue accepted that they had made mistakes in conducting the investigations and that the proposals they had put to the General Commissioners of Tax for determination in December 1994 were not soundly based. Mr G's liability was substantially reduced, interest and penalties were waived and the Revenue offered to meet certain of his costs and to make him a consolatory payment for their exceptional delays. The Ombudsman found that the Revenue were not wholly responsible for the delays and found no evidence that Mr G had been treated insensitively.
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