41. To provide a clear decision, we will review each issue separately. Where issues are similar in nature, or closely related, we will address them collectively.
Mr A says recovery action taken by HMRC in relation to the alleged underpayment was unnecessary and poorly managed
42. As we have already mentioned in the background section of this report, HMRC sent demand letters to Mr A throughout 2017 and, following Mr A’s and Mr O’s objections, it reassured them in October 2017 that further recovery action would cease. Despite this, HMRC sent further demand letters which resulted in it referring his account to the debt collection agency in May 2018, who continued to contact him in relation to the alleged PAYE debt.
43. We appreciate worry and distress was likely caused to Mr A as he now not only had to continue his dispute with HMRC about the alleged PAYE underpayment but was also having to communicate with its debt collection agency in relation to the recovery action, despite HMRC’s earlier assurances that it would not pursue the sum whilst he continued to dispute it.
44. A key factor in the PAYE underpayment appears to relate to HMRC’s RTI system, which it says is set up to recognise certain patterns with employers’ tax submissions. HMRC says if RTI returns are late or those payments do not match up with what the RTI system expects, the system will automatically show these as underpayments. HMRC says such issues can normally be rectified by working together with the customer to correct any mistakes.
45. Ultimately, there appears to have been problems on Mr A’s RTI account, which is why HMRC needed further RTI submissions from him in order to correct the underpayment showing on his account. HMRC failed to stop its debt collection department from pursuing Mr A for the outstanding PAYE sum, despite its initial assurances it would do so.
46. Our investigation will not explore the problems with Mr A’s RTI account or the errors HMRC found on it, as it is not within the scope we have agreed with all parties. Our focus is upon HMRC’s subsequent debt recovery action and how it handled this.
47. Our provisional report noted that HMRC’s Debt Management and Banking Manual internal guidance, in particular section DMBM519605 - Debt and return pursuit: PAYE RTI: disputes: disputed charge process set out a process which would allow it to prevent recovery action from progressing, where there was an ongoing dispute. HMRC recently advised, however, that such guidance would only be relevant where its Charge Resolution Team (CRT) had become involved, as this guidance applies to its actions, and this did not happen in Mr A’s case until October 2018 once his EYU had been submitted and his account was formally recognised as in dispute.
48. HMRC does agree that its debt management team, who were communicating with Mr A and Mr O in 2017, should have referred the matter to its CRT team much sooner than it did. By doing so, this would have allowed CRT to formally lodge the dispute and would then allow its debt management team to halt recovery action.
49. While we recognise that the DMBM519605 guidance is not relevant to HMRC’s debt management actions in 2017, we can see that HMRC wrote to Mr A on 26 October 2017 to say it would halt recovery action until the PAYE dispute was resolved, but then did not follow through with this commitment. Therefore, HMRC’s continued pursuit of the debt represents maladministration as it went against what it had previously agreed with Mr A.
50. In reaching this view of HMRC’s handling of the debt recovery, we do not see it acted in line with its Our Charter guidance, which says under, ‘Getting things right’: ‘We’ll give you accurate, consistent, and clear information. This will help you meet your obligations and understand your rights and what you can claim. When we ask for information, we rely on you to give us full, accurate and timely answers. If you disagree with us, we’ll tell you about options available to you and work with you to reach an appropriate outcome quickly and simply.’
51. From what we have seen so far, there is no evidence to suggest HMRC acted in line with the above guidance after Mr O contacted it to dispute the PAYE overpayment on 23 May 2017. While HMRC did write to Mr A on 26 October 2017 to reassure him it would stop all enforcement action while the PAYE debt was in dispute, this does not appear to have stopped further collection letters from being sent, or HMRC referring his account to an external debt collection agency in May 2018. HMRC also told us that its debt management team could have referred his account to its CRT team at an earlier stage, which may have allowed it to halt recovery action sooner and more effectively, but it did not do so.
52. We also do not see HMRC acted in line with our Principles of Good Administration which say: ‘Public bodies should do what they say they are going to do. If they make a commitment to do something, they should keep to it, or explain why they cannot. They should meet their published service standards, or let customers know if they cannot.’
53. Had HMRC correctly followed what it agreed with Mr A in October 2017, and if it had correctly referred his account to its CRT team in good time, it is likely Mr A’s account would not have been escalated to debt management whilst the dispute was open and ongoing.
54. As such, we can see maladministration in HMRC’s handling of its recovery action.
55. HMRC wrote to Mr A on 28 December 2018 during its complaints process and said due to an error on its RTI system, the PAYE issue had been escalated unnecessarily. It acknowledged the impact this had on him and acknowledged the RTI issues could have been resolved without the need to involve its debt management department or the third-party debt collection agency. It added that Mr A and Mr O had contacted it on numerous occasions in an attempt to resolve the RTI submissions, but HMRC’s mistakes continued, and it accepted this caused Mr A a great deal of worry and distress.
56. We understand Mr A’s and Mr O’s view was that had HMRC’s complaints team staff had a better understanding of technical issues such as its RTI systems, or had staff had better access to specialists who could advise them on such matters, their calls and correspondence would have been better handled and the issues they describe would not have progressed as far as they did.
57. We will focus on HMRC’s complaint handling in the next section of this report. However, it is important to clarify at this stage that its handling of Mr A’s and Mr O’s enquiries were maladministrative as we do not see they were handled in line with HMRC’s Our Charter guidance, which says: ‘Being responsive When you get in touch with us, we’ll make sure that the people you deal with have the right level of expertise. We’ll answer your questions and resolve things first time, or as quickly as we can…’
58. During the complaints process, HMRC acknowledged its mistakes and in response it said it would carry out a review of the training its Employer Support Helpline (ESH) staff received. We note Mr O had contacted this helpline on a number of occasions during the PAYE dispute in an attempt to get more information and resolve the problems. HMRC also said it would notify its ‘Learning Lessons’ team to raise the communications problems which occurred between its ESH staff and technical staff, who are more knowledgeable about its RTI systems.
59. As part of our investigation, we made some enquiries to HMRC as we wanted to understand more about the service improvements it said it had now put in place.
60. HMRC told us it had improved guidance and training for its ESH staff. It is this helpline Mr O and Mr A contacted a number of times during the RTI dispute, and HMRC had agreed its staff could have been more effective in resolving their concerns at an earlier stage.
61. HMRC says its ESH staff now have a better understanding of the RTI system and the potential problems that can occur when something goes wrong with it. Alongside this, HMRC says its ESH staff can now refer customers directly to its ‘Extra Support Team’ who can provide, ‘more personal and supportive service that was previously not available’. HMRC adds that regular coaching is also conducted with ESH staff to ensure its advisors are respectful, supportive, and empathetic and there is a dedicated ‘Employer Complaints Team’ which ESH staff can refer cases to, should the need arise.
62. HMRC felt these service improvements would help to prevent similar problems from reoccurring.
63. Alongside the apologies and service improvements, HMRC offered Mr A £200 for the worry and distress its errors caused.
64. We are aware the £200 was intended to remedy both the worry and distress caused by its mishandling of Mr A’s PAYE account and the worry and distress caused by its complaint handling (which we will look at in more detail in the next section of this report).
65. In reviewing HMRC’s remedy, we will consider it collectively as the total figure it awarded, rather than breaking it down, and we will take this same approach when reviewing HMRC’s complaint handling in the next section of our report.
66. We will summarise at the end of our report and give our view as to whether the £200 is enough, overall, to put right what went wrong.
Mr A is unhappy with HMRC’s complaint handling, which he says was poor and contributed to his worry and distress
67. In looking through the complaint papers, we can see HMRC delayed in responding to complaint correspondence it received from Mr A, Mr O and Mr A’s MP. While we understand Mr A’s and Mr O’s correspondence with HMRC began earlier, our investigation will focus upon the complaint handing in 2018 as this is the period that has been clearly referenced in their complaint both to us and to HMRC.
68. On 29 January 2018, Mr O wrote to HMRC to raise concerns about the RTI submissions, and to raise related concerns about the debt collection process in which HMRC was still engaged. We do not see this letter was formally responded to in the months which followed.
69. This led Mr A and Mr O to make further contact with HMRC in March 2018 and resulted in them requesting ADR on 20 April 2018 in order to get a response to the earlier 29 January 2018 letter. HMRC acknowledged the ADR request on 16 May 2018.
70. As we have already set out above, HMRC determined the content of Mr A’s and Mr O’s earlier letters was not suitable for ADR and instead decided to forward them to its debt management department, due to those letters expressing dissatisfaction about HMRC’s continued and persistent debt recovery action.
71. In reviewing HMRC’s ADR Compliance checks series – CC/FS21 guidance, we note under ‘What types of disputes are not suitable for ADR’, it says: • ‘complaints and disputes about HMRC delays in using information or giving you misleading advice • debt recovery or payment issues’
72. It also says, ‘…You can apply for ADR at any stage of an enquiry, and at any stage of the tribunal proceedings, either when we cannot reach an agreement with you, or once HM Revenue and Customs (HMRC) have issued their appealable decision.’
73. HMRC therefore appears to have been correct in declining Mr A’s and Mr O’s request for ADR as their concerns around the PAYE account, the debt HMRC was claiming, and its delays in responding to them, are not suitable for this type of dispute resolution.
74. While HMRC acted in line with guidance by not opening ADR, we do not see it clarified to Mr A or Mr O why it had decided to take this course of action until sometime later.
75. In September 2018, HMRC responded to concerns raised in Mr A’s and Mr O’s previous correspondence, but it did not give any detailed and full explanation as to why it had declined to open ADR, as they had requested. We can see HMRC’s letter dated 28 December 2018 gave a more detailed response to the issues raised in their previous letters and said staff would be in contact with Mr O to discuss why it had decided not to open ADR. A further letter from HMRC in February 2019 provided additional, written clarity on this issue.
76. In considering HMRC’s overall complaint handling at this stage, it is clear it failed to answer both Mr A’s and Mr O’s concerns in a timely manner. Questions they raised in January, March, and April 2018 were not fully responded to until late 2018. In looking at the ADR issue, their request was sent to HMRC on 20 April 2018 and was acknowledged 18 working days later on 16 May 2018 by its debt management team, but there was no further clarity around the fact that it had decided to deal with this as a debt management complaint, rather than ADR, until almost seven months later. Likewise, the MP’s enquiry to HMRC of 17 September 2018 did not receive a substantive response following an unsuccessful call to their office in October 2018.
77. Overall, we do not see HMRC’s handling of Mr A’s and Mr O’s complaint correspondence is in line with HMRC’s Complaint Handling Guidance, in particular section, ‘CHG615 - Standards of service for dealing with complaints: Response times’.
78. We note this guidance was recently updated in September 2021 and it now states HMRC should: ‘acknowledge the complaint within the time frame set by your business area.’ However, at the time of the events we are considering, the relevant version stated complaints should be acknowledged in five working days. We can see from the National Archives this standard was still displayed in March 2019 so this older version of the guidance, and its five working day timescale is therefore applicable to our investigation.
79. The older version of HMRC’s CHG615 guidance stated staff should: • ‘acknowledge the complaint within 5 working days of its receipt in HMRC • provide a full or interim response to the complaint within 15 working days of its receipt in HMRC.’
80. This guidance also said: ‘If it becomes clear that you will not be able to provide a full reply within 15 working days (for example due to the complexity of the complaint or the work needed to gather relevant information) send an interim response. Explain where you have got to with the complaint and give an indication of when you will send a final response.’
81. Having considered HMRC’s handling of Mr A’s and Mr O’s complaints, we do not see it acknowledged or handled them in line with the above guidance. We also do not see it handled those complaints in line with our Principles of Good Complaint Handling, which say public bodies should: ‘Deal with complaints promptly, avoiding unnecessary delay, and in line with published service standards where appropriate. Resolving problems and complaints as soon as possible is best for both complainants and public bodies.’
82. HMRC’s complaint responses in late 2018 and early 2019 provided more detailed explanations as to what went wrong with its handling of Mr A’s PAYE account, and its handling of his subsequent complaints and enquiries around ADR. These letters also considered what remedy it would offer him to put right what had gone wrong.
83. HMRC apologised for not responding to Mr O’s letter dated 29 January 2018 and for its handling of his and Mr A’s other correspondence, and it acknowledged that it had handled their complaint poorly. Alongside this, it offered £100 for the distress and frustration caused by those errors.
84. It noted that had its staff been better at identifying the issues raised in Mr A’s and Mr O’s correspondence and had they cross referenced this with previous correspondence it had received from them, it could have acted more quickly and effectively in response and potentially avoided a great deal of the distress and frustration which was ultimately caused.
85. We agree with HMRC’s views on what it got wrong and think it was right to recognise poor service, as we can see there were delays in it both acknowledging and responding to Mr A’s and Mr O’s complaint correspondence, and this will clearly have led to some distress and frustration.
86. In addition, we can see that had HMRC better handled Mr A’s and Mr O’s correspondence in 2018, particularly the complaints concerning recovery action, there is the possibility that it could have realised its mistake at an earlier stage and prevented the recovery action from escalating to the extent that it did. We can therefore see indications HMRC’s mistakes in complaint handling may have directly impacted on, and unnecessarily contributed to, the worry and distress caused by HMRC’s recovery action, which we discussed in the previous section of this report.
87. We will now consider whether the remedy offered to Mr A in terms of the mistakes made in HMRC’s debt recovery action and its handling of his and Mr O’s complaint correspondence is proportionate to put right what went wrong.
Our decision on remedy
88. As mentioned earlier in this report, we are aware HMRC awarded £100 for poor complaint handling and £100 for the worry and distress its mistakes in handling the substantive tax issues caused. We will, however, consider the financial remedy in this section of our report in terms of the overall £200 it offered to put right what went wrong.
89. In considering the case history, we can see Mr A’s worry and distress will have started in around April 2017 when he first began receiving demand letters from HMRC. This worry and distress only increased as time went on and HMRC passed the outstanding sum it said he owed to one of its external debt collection agencies. This put Mr A in the position where both he and his representative were not only having to dispute the alleged PAYE underpayment with HMRC and the associated demand letters it sent but were also having to deal with the debt collection agencies’ letters and calls once HMRC involved them in May 2018.
90. The recovery action fully ceased in July 2018 when Mr A agreed to pay the sum HMRC claimed was outstanding. This means there was a fifteen-month period where HMRC was pursuing debt collection against Mr A, which it has since acknowledged was unnecessary and could have been avoided.
91. We understand that throughout much of this time, and continuing to early 2019, Mr A continued to experience some worry and distress as a result of the delays and mistakes HMRC made during its complaints process.
92. Overall, we can see a certain amount of worry and distress was caused to Mr A over a 22-month period.
93. Mr O tells us further remedy should be awarded by HMRC as it could have resolved the debt collection issues at an earlier stage, which would have avoided much of the worry and distress that was subsequently caused to Mr A. Mr O tells us further remedy is appropriate to put right the worry and distress caused to Mr A over this unnecessarily prolonged period.
94. We acknowledge the consistent problems Mr A experienced throughout this period of time. We also note the impact caused by these problems was not severe in nature and there was no wider or lasting impact. Rather, we understand Mr A experienced varying degrees of frustration and distress caused by HMRC’s delays in responding and in the detail and consistency of its responses. As such, we can see the impact caused to Mr A is at level two on our severity of injustice scale, which describes a relatively low impact but was not simply a one-off event.
95. We can see the worry and distress caused to Mr A by HMRC’s mistakes has been put right by the financial remedy it awarded, when viewed alongside the systemic remedy and apologies it also provided, which we set out earlier in this report. In our view, this remedy is also consistent with other cases we have considered where mistakes by public organisations resulted in a similar impact and the financial remedy we found to be proportionate to put it right.
96. We therefore consider the £200 awarded by HMRC is reasonable and proportionate to put right the cumulative impact of its errors in its handling of Mr A’s alleged debt and its handling of his complaint.
97. We can also see the £200 it decided to award is in line with its Complaints and Remedy Guidance, in particular section ‘CRG6000’ which says: ‘…You may have to consider pre-existing circumstances when deciding whether to make a payment or the level of that payment. Payments are not intended to put a value on the distress suffered…
…Our payments for worry and distress are meant to be a token - a way of acknowledging that our mistakes and delays have affected someone badly.’
98. We can also see this financial remedy is generally in line with what we would have recommended based on our own Guidance on Financial Remedy, if Mr A had approached our Office and HMRC had not already reached the same view.
99. In light of the above, we have decided to not uphold Mr A’s complaint as although HMRC made mistakes in this case, it has already taken appropriate action to put right the impact those errors caused.