The Adjudicator's Office

6. Ms K complained HMRC’s maladministration resulted in her not being eligible for SEISS. Ms K acknowledges she wrongly denoted some parts of her income as being employed Pay As You Earn (PAYE) instead of self-employed income in her Self-Assessment Tax Return (SATR) but considers HMRC is responsible for this. Ms K thinks this is evidenced by the following examples: • HMRC had historically treated income for workers in her sector (entertainment) in an inconsistent and unclear way. Ms K says this is demonstrated by the updated guidance HMRC introduced (ESM 4121) in September 2020, which is much clearer than the previous version.

• HMRC did not give certain companies in the entertainment industry sufficient guidance or instruction about whether they were PAYE or self-employed. Ms K points to guidance PAYE11010 in HMRC’s PAYE manual which she says gives incomplete and confusing advice. Ms K said this guidance led some engagers to treat her as an employee rather than self-employed. Ms K said HMRC then auto populated information received from engagers into an individual’s SATR, marking them as PAYE rather than self-employed. Ms K said it was unreasonable to expect those individuals to challenge the information placed in their SATR. Ms K says HMRC should have supported engagers/employers with better information on this issue.

• HMRC have been inconsistent about whether it can apply discretion and allow people such as her access to SEISS. Ms K said HMRC had made contradictory statements to her accountant about whether it had discretion and applied its discretion inconsistently with other cases. Ms K said HMRC has not offered a single reason as to why it cannot exercise discretion in her case.

7. Ms K also complains about incomplete responses from the Adjudicator’s Office. In particular, the Adjudicator: a) referred to the wrong HMRC guidance when taking a view on her complaint. Ms K said the Adjudicator used HMRC’s updated guidance rather than the guidance in place at the time of the events.

b) failed to consider Ms K’s concern that she had been treated inconsistently in relation to others.

8. Ms K says HMRC’s actions have caused her severe financial hardship. In particular, not having access to SEISS meant: • she was at risk of losing her home and car • she had to obtain work during the pandemic in sectors which were outside her skillset.

• she felt helpless, stressed, and anxious during the pandemic.

9. Ms K is seeking compensation from HMRC equivalent to the money she would have received under SEISS. She also wants to ensure that others in her position have decisions on their SEISS applications reversed.

10. Ms K works in the entertainment industry. In May 2020 she applied to HMRC for SEISS as her work was directly affected during the COVID-19 pandemic. However, HMRC refused her request. HMRC said Ms K did not meet the requirements for SEISS because her employment income (PAYE from an employer) was greater than her self-employment income.

Issue 1 – Ms K considers HMRC are responsible for her submitting her SATR with some of her income marked as PAYE instead of self-employed income. Ms K said this meant she was not eligible for SEISS.

12. Before we decide if we should investigate a complaint, we look at whether there are signs the organisation has got something wrong. We do this by comparing what should have happened with what did happen. We have done this and, we have not found any indications something has gone wrong.

13. The SEISS Directions are clear that to be eligible for SEISS the individual has to meet the profits condition. This means their trading (self-employed income) must be higher than their non trading (PAYE) income. In Ms K’s case, she accepts she is not eligible for SEISS as some of her income was wrongly marked as PAYE in her SATRs.

14. However, Ms K considers HMRC are at fault for her income being marked wrongly as PAYE instead of self-employed income. HMRC’s discretionary guidance for access to SEISS says a person may be eligible if an error caused by HMRC’s processes caused a person not to qualify.

15. Ms K makes two points to support her view that HMRC made an error. We will address these two points in turn:

16. First, Ms K says the updated HMRC guidance for ESM4121 from September 2020 is much clearer than the previous iteration from March 2017. She believes this demonstrates the 2017 version was flawed. We consider any changes Government departments make to guidance do not necessarily make the previous version flawed or maladministrative. Therefore, we have considered the ESM 4121 guidance in place at the time of the events for Ms K’s case, which is the 2017 version. In doing so, we have taken a view on whether it met our Principles – being open and accountable – which says public bodies should provide advice that is clear, accurate, complete, relevant, and timely.

17. The 2017 version of ESM4121 is fairly technical. It is intended to be an internal manual for HMRC staff but was publicly available on HMRC’s website. It explained: • the historic background and caselaw around tax arrangements for those in the entertainment industry.

• contracts of employment did not necessarily mean those in the entertainment industry were employed (PAYE) • normally these individuals would be self-employed traders.

• examples of circumstances where PAYE might be appropriate • HMRC accept most in the entertainment industry would be liable for self-employed National Insurance contributions.

• if in doubt, advice should be sought from the relevant HMRC business area.

18. The manual indicates this is a historically complicated issue. We can understand why Ms K would have preferred an obvious instruction from HMRC. We have not seen evidence to indicate HMRC’s 2017 guidance for ESM4121, in place at the time of Ms K’s SEISS application, was unclear or inconsistent. This guidance said most people were self-employed but there were circumstances where some people may be PAYE instead. It provided examples of people who might be considered PAYE and said to seek advice in the event of uncertainty. Ms K has not provided sufficient information to indicate HMRC’s guidance here is inaccurate.

19. In the event a person was unsure whether their circumstances made them self-employed or PAYE, the 2017 ESM4121 guidance said advice should be sought from HMRC colleagues, as the guidance itself is primarily internal guidance. Ms K did not understand the 2017 guidance. We have not seen evidence to show she contacted HMRC to seek clarity before submitting her SATRs. For these reasons, we consider HMRC’s ESM4121 guidance from 2017 appears accurate, in relation to Ms K’s case, and provided a route to address any uncertainty. Therefore, the evidence from the guidance indicates HMRC acted in an open and accountable way on Ms K’s case.

20. Ms K’s second concern is that HMRC failed to provide sufficient guidance and instruction to engagers about whether they should treat those in the entertainment industry as PAYE or self-employed. She points to another piece of HMRC guidance - PAYE11010 (from March 2019), which she says gave incomplete and confusing advice. Ms K says this led a number of engagers to submit information for people such as her. Ms K says once this information was submitted it was unreasonable to expect self-employed taxpayers to change it.

21. Ms K has not said or provided evidence to say engagers told her they were confused by this piece of guidance, and this led them to input information for her contracts. However, in order to be helpful, we have addressed this issue in full. This is because we can understand she is seeking clarity around how the HMRC process works in order to make sense of what happened to her application for SEISS in 2020. Again, our Principles expect HMRC to be open and accountable on these matters, and to provide clear, accurate, relevant and timely information.

22. Ms K points to HMRC’s PAYE manual (PAYE11010) from 2019 which says employers should submit information for people in the entertainment industry. She says this guidance is misleading because self-employed people do not require engagers to submit information for them. She says if engagers do this, self-employed people have their SATR auto-populated with information that says they are employed rather than self-employed.

23. However, it is worth noting PAYE guidance on HMRC’s website is for employers and employees. Ms K is saying she is neither of these things as she considers herself to be self employed. The PAYE guidance is clearly not intended for her and her engagers. It is also worth noting that other HMRC guidance may be more applicable here. For example, ESM4121 and HMRC’s Business income manual from May 2019 which explained the complex tax history for those working in the entertainment industry. The 2019 Business Manual said while contracts for these people presented as though they were employment (PAYE) contracts, caselaw did not support that. It said the factor for deciding if a person was employed or self-employed was the way the individual carried on their profession. In other words, the individual was instrumental in establishing how their tax affairs were managed.

24. HMRC conveyed this to Ms K and her accountant when it responded to her complaint. On 12 January 2021, HMRC said it remained the individual’s responsibility through their own actions, or their appointed agent, to know the facts about their contract of engagement and include it in the correct section of the SATR.

25. For these reasons, we consider the evidence is insufficient to support Ms K’s contention that HMRC’s guidance (PAYE11010) was unclear or incomplete in relation to her case. This is because the PAYE guidance was not relevant to Ms K’s situation. Further, HMRC’s literature was clear the situation for the entertainment industry was complicated. The responsibility was on the individual, in relation to how they carried out their contracts, as to whether they were PAYE or considered self-employed. The evidence indicates HMRC’s actions were open and accountable in this way.

Issue 2 - Ms K says HMRC have been inconsistent about whether it can apply discretion and allow people such as her access to SEISS. Ms K said HMRC has not offered a single reason as to why it cannot exercise discretion in her case.

26. Ms K said HMRC had provided inconsistent and contradictory responses about whether it could exercise discretion to allow her access to SEISS. Ms K said it had not offered a single reason as to why it could not exercise discretion in her case.

27. HMRC’s discretionary policy for access to SEISS says it may allow individuals access to SEISS if, among other things, there was evidence HMRC made an error. Ms K considers her difficulties obtaining SEISS are as a result of HMRC’s mistakes. In Ms K’s case, there is no evidence to indicate HMRC made an error. In particular, we have not seen evidence to indicate its guidance was sufficiently unclear, or that it misdirected Ms K or one of her engagers, in relation to completing her SATR. Therefore, we consider HMRC weighed up the evidence appropriately when saying Ms K did not meet its discretionary criteria, which is in line with our Principles (getting it right).

28. However, Ms K said HMRC had not offered a single reason for not exercising discretion on allowing her access to SEISS. Our principles say being open and accountable means stating criteria for decision making and giving reasons. In this case, HMRC simply said, in their letter of 12 January 2021, that discretion for access to SEISS was used in limited circumstances. Therefore, we agree with Ms K HMRC did not state its criteria or reasons. HMRC should have explained what discretionary criteria would have allowed Ms K access to SEISS if it had made the error Ms K claimed it had, before then explaining it did not accept there was evidence it made an error. For these reasons HMRC appear not to have acted in an open and accountable way. This is an indication of maladministration.

29. Before we decide if we should investigate a complaint, we look at whether there are signs the events complained about had a negative effect which the organisation has not put right. In this case, we recognise Ms K was likely to have been confused and frustrated by HMRC’s apparent failure to explain why her situation did not meet its discretionary criteria. She was trying to make sense of a complex situation during a turbulent financial time for her. Our financial remedy scale says organisations should offer an apology for low level injustice such as annoyance, frustration, worry and inconvenience from a single instance of maladministration. As Ms K has now received this decision explaining matters, and she did not request an apology from HMRC as an outcome, we do not consider it is proportionate to seek an apology from HMRC on this issue. Further, we have already addressed the systemic issue of HMRC not providing explanations about its discretionary policy for SEISS through a recommendation on another investigation. Therefore, we trust Ms K is reassured this mistake should not occur in future. On this basis, we do not consider there are indications of an unremedied injustice and so no further action is required from HMRC on this matter.

Issue 3 – Ms K complained the Adjudicator’s response was incomplete. a) In relation to the version of guidance referred to by the Adjudicator and b) its response to HMRC’s discretionary policy.

30. Our Principles say public bodies should follow their own policy and procedural guidance at the time the events occurred. It would be unfair and unjust to judge the actions of Government departments against later versions of the same guidance which were not in existence at the time the events occurred. Further, we expect public bodies to be open and accountable and to provide clear and reasoned grounds to support their decisions.

31. We believe Ms K is correct. The Adjudicator referred to HMRC’s ESM4121 guidance from 2020, rather than the version (from 2017 – see above) which was in place when Ms K filed her SATR in January 2020. Therefore, the Adjudicator did not appear to get it right as it did not refer to the correct procedural guidance and this is an indication of maladministration.

32. We also agree with Ms K that the Adjudicator did not explain why Ms K did not meet HMRC’s discretionary criteria. Instead, the Adjudicator’s decision simply said Ms K didn’t meet the conditions for exercising discretion.

33. We accept it would have been frustrating for Ms K not to receive a properly reasoned response to her complaint about why she her situation did not meet HMRC’s requirement for exceptionality. She would have continued to be confused about why HMRC and the Adjudicator did not believe she should be allowed access to SEISS on a discretionary basis.

34. Our financial remedy scale says organisations should offer an apology for low level injustice such as annoyance, frustration, worry and inconvenience from a single instance of maladministration. However, as Ms K has now received our decision explaining matters, and she did not request an apology as an outcome, we do not consider it is proportionate to seek an apology from the Adjudicator on this issue. Further, we have already addressed the wider issue of the Adjudicator not providing explanations about HMRC’s discretionary policy for SEISS through a recommendation in another case. For these reasons, we do not consider there are grounds to ask the Adjudicator to take further action.

1. We have carefully considered Ms K’s complaint about HM Revenue & Customs (HMRC) and the Adjudicator’s Office (the Adjudicator). We have seen no indication anything went seriously wrong in relation to Ms K’s concern that errors in HMRC’s guidance meant she was prevented from accessing HMRC’s Self Employment Support Scheme (SEISS) grant during the COVID-19 pandemic. Further, HMRC appeared to apply its discretion for access to SEISS appropriately in Ms K’s case. However, we considered there were problems with HMRC and the Adjudicator’s explanations to Ms K about her case. We believe the actions HMRC and the Adjudicator have taken regarding appropriately communicating with complainants, should provide an appropriate remedy to the injustice suffered by Ms K.

2. We appreciate the COVID-19 pandemic was a particularly difficult time for people such as Ms K in the entertainment industry. She spent a great deal of time worrying about her financial situation and not knowing how long she would be unable to restart work.

3. We carefully considered the evidence Ms K provided. We did not see indications to support Ms K’s view that HMRC’s guidance for the entertainment industry on self-employment matters was unreasonable. Therefore, we could not say HMRC’s actions lead her to submit incorrect Self-Assessment Tax Returns (SATRs) which excluded her from accessing SEISS.

4. However, the evidence suggested HMRC, and the Adjudicator made mistakes in their handling of Ms K’s complaint. While the evidence shows HMRC made a reasonable decision in not applying discretion to Ms K and refusing her access to SEISS, it did not fully explain to her the criteria it was relying in its discretionary policy. The Adjudicator’s decision to Ms K appeared to repeat this failing in its consideration of Ms K’s complaint. Further, the Adjudicator appeared to refer to the wrong version of HMRC’s guidance in its decision making.

5. We consider this statement sets out HMRC’s decision on SEISS, the relevant discretionary criteria/guidance and why it considered Ms K did not meet its requirements for SEISS/discretion. In light of these, and because both HMRC and the Adjudicator have separately taken action to improve its approach to explaining discretion for SEISS matters, we do not believe there is further information for either HMRC or the Adjudicator to provide Ms K. Further, Ms K is not seeking an apology from HMRC or the Adjudicator. For these reasons, we consider no further action is required.