14. Mr H complains HMRC failed to properly consider his claim for reimbursement, or the evidence he supplied to support his claim on 12 June 2020.
15. On 2 November 2019, Mr H complained to HMRC. He complained HMRC’s VAT enquiry into his business had cost him £55,000 in legal and professional fees. He said he wanted HMRC to pay him compensation for the financial loss, and the effect it had on his mental health.
16. On 14 November 2019, HMRC emailed Mr H and said it was ‘looking into’ his compensation request. It told Mr H it needed to see evidence of the professional costs claimed in the form of receipts and paid invoices. HMRC also said it wanted to see evidence of the effect its VAT enquiry had on Mr H’s health and wellbeing.
17. On 19 November 2019, Mr H emailed evidence of the costs he incurred to HMRC.
18. On 28 November 2019, HMRC wrote back to Mr H and said the total amount of the invoices he supplied were £36,000.02, which was less than the £55,000 Mr H was claiming for. HMRC also said it needed to review the evidence in more detail and asked Mr H if he had any business insurance. HMRC asked Mr H to reply by 10 December 2019.
19. On 4 December 2019, Mr H told HMRC some of the invoices had been misplaced and he was having difficulty getting copies to provide it with. He also said all the invoices submitted were for HMRC matters and he confirmed he did not have business insurance. On 5 December 2019, Mr H sent HMRC a letter which showed he had appointed a VAT consultancy firm in relation to the VAT enquiry.
20. On 18 December 2019, HMRC contacted Mr H and asked him to provide additional evidence to show the specific work carried out by Mr H’s accountant and solicitor, along with the invoices. HMRC said that without this additional information it would be unable to consider his compensation claim. HMRC explained what evidence it needed to see to be able to consider the compensation claim further. HMRC asked Mr H to provide a response by 15 January 2020.
21. On 8 January 2020, Mr H emailed HMRC and provided spreadsheets, invoices and a letter between Mr H and a tax advice firm. Mr H said the accountant and solicitors were unable to provide further breakdowns.
22. On 27 January 2020, HMRC contacted Mr H and told him it was dealing with his request for compensation as a tier one complaint. HMRC said it had reviewed his case and it had identified a mistake it made during its VAT enquiry into Mr H’s business when it did not use all the documents available to it during the enquiry. HMRC apologised and offered Mr H £100 for the worry and distress caused.
23. HMRC also said to deal with Mr H’s compensation claim it still required additional evidence from Mr H’s accountant and solicitors. HMRC said it reviewed the spreadsheets Mr H had sent it as evidence. HMRC annotated and highlighted sections of the spreadsheets and returned them to Mr H. HMRC asked Mr H to provide further evidence by 10 February 2020.
24. On 10 February 2020, Mr H contacted HMRC and said he was not prepared to accept the £100 redress offered and he asked it to reconsider its decision to pay the legal costs he incurred.
25. Mr H also said he did not have any more evidence other than the spreadsheets and invoices provided. HMRC handled Mr H’s email as a tier two complaint.
26. On 12 February 2020, HMRC responded to Mr H and said it still required evidence to show his compensation claim was not for normal day-to-day costs, and without further evidence it was unable to pay more than the £100 it paid in January.
27. On 11 June 2020, HMRC emailed Mr H and said it had not yet received a reply to its email dated 12 February 2020, where it asked for additional information to support his claim.
28. On 12 June, Mr H replied to HMRC and said that as he had explained in his email, on 10 February 2020, he had provided all the evidence he could in relation to his compensation claim. Mr H also provided a second copy of a spreadsheet that listed the professional fees he was claiming.
29. In July 2020, HMRC issued its tier two response. In this response, HMRC said it does not reimburse customers for normal day-to-day costs associated with complying with their legal obligations, and it could not consider Mr H’s compensation claim further unless he could provide additional evidence.
30. HMRC also said:
‘It is our policy to reimburse costs incurred as a direct result of our mistake or delay, so long as those costs are evidence based, reasonable and proportionate.
We do not reimburse the normal day to day costs people incur in complying with their legal obligations. This includes the normal costs of communication, clarifying or verifying matters, keeping specific records and preparing returns and the costs arising from normal enquiries and interventions.’
31. To help us consider this complaint, we have referred to HMRC’s ‘Complaints and Remedy Guidance’. As also outlined above, HMRC’s guidance says it will not reimburse costs associated with normal day-to-day costs, including costs of communication, clarifying, or verifying matters, keeping specific records, and preparing returns and the costs arising from normal enquiries and interventions.
32. The guidance also says, ‘We normally require complainants to support their claim with evidence of costs paid before considering whether they are reasonable and how much to reimburse. Evidence can be in the form of receipts, paid invoices etc. depending on the nature of the cost’.
33. From the evidence available to us, we can see HMRC told Mr H on several occasions that the spreadsheet and invoices he sent did not contain enough information to clarify what the payments were for, or whether they had been paid. HMRC asked Mr H several times, as outlined above, to provide further information relating to the invoices and spreadsheets he had already provided.
34. Under ‘CRG5100 – Financial redress: Considering claims’ of HMRC’s ‘Complaint and Remedy Guidance’ it says ‘Sometimes, the invoice issued by a complainant’s agent may not be sufficiently detailed for us to identify and quantify the additional costs the customer has had to incur in sorting out our mistake. For example, the invoice doesn’t distinguish between work covering normal day to day costs and the additional costs being claimed – or where there has been considerable correspondence and it is not clear what is being claimed’.
35. The guidance says that in these instances, HMRC may need to ask the complainant to provide further information to enable it to be satisfied the costs claimed are reasonable.
36. From the evidence available to us, we can see HMRC considered the evidence Mr H provided and decided it did not sufficiently demonstrate how the costs he was claiming were a direct result of the error HMRC made during its VAT enquiry. HMRC was clear it could not fully consider Mr H’s claim unless it received additional information such as paid invoices, receipts, or an hourly breakdown of the accountant’s time and details about what they were charging him for specifically.
37. As part of our enquiries, we asked HMRC to provide us with copies of the evidence Mr H sent to it and that it considered.
38. In order to cross reference the evidence submitted as part of the claim, we asked Mr H to send us copies of the evidence he sent to HMRC.
39. From the evidence available to us, we can see that HMRC has seen and considered all of the evidence Mr H has so far been able to produce in support of his claim.
40. However, the evidence supports HMRC’s explanation that the information Mr H has provided does not contain the right amount of detail to allow HMRC to award any further costs to him. As outlined above, this is because the invoices Mr H provided appear to relate to costs incurred in dealing with normal day-to-day enquiries, rather than avoidable costs, as a result of HMRC error. Mr H also provided spreadsheets he created himself, which is also not robust and independent evidence under HMRC’s guidance, as referred to above.
41. With all of the above in mind, we can see no indications of service failure by HMRC. This is because we can see HMRC considered Mr H’s claim for expenses in line with its internal guidance. Upon considering Mr H’s claim and his evidence, HMRC notified Mr H his evidence lacked sufficient detail and it told him what additional information it would require in order to proceed with considering his claim.
42. This is helpful and fair in our view, as although HMRC had explained it must decline Mr H’s request it was effectively clarifying what it needed to see and giving him further opportunities to provide relevant evidence. This is in line with Our Principles of Good Administration, which say public organisations ‘ […] should give people information and, if appropriate, advice that is clear, accurate, complete, relevant and timely. Public bodies should be open and truthful when accounting for their decisions and actions. They should state their criteria for decision making and give reasons for their decisions.’
43. We can see from the evidence available to us Mr H was unable to provide new additional information that contained the level of detail HMRC needed to see in order to continue with his claim for reimbursement.
44. Our ‘Principles of Good Administration’ say public bodies ‘should follow their own policy and procedural guidance, whether published or internal’ which from the evidence available to us, we can see HMRC has done.
45. If Mr H is able to provide proof of paid invoices or receipts that contain further detail of the services he paid for, and if he believes these show they were incurred as a result of HMRC’s mistake, he can re-submit a claim to HMRC.
46. For the reasons outlined above, we will take no further action.