HM Revenue and Customs

4. Mr X complains that HMRC declined his claim for tax relief for the tax year 2017-18, despite not receiving from HMRC the correct tax return for completion until July 2020.

5. He further complains that the AO did not uphold his complaint or investigate the contents of his Subject Access Request (SAR) from HMRC.

6. He says that the actions of both organisations have affected his mental health and have caused him stress, which has contributed to symptoms of asthma and shingles.

7. Mr X would like HMRC to pay the tax rebate he believes he is entitled to. He would also like both organisations to make their services more approachable and user-friendly.

8. In October 2017, Mr X started a new business venture. He took two separate lump sum drawdowns from his pension to help fund it. A drawdown is a method of getting money out of your pension whilst continuing to allow your pension fund to grow.

9. HMRC received a form P50Z from Mr X on 13 October 2017 and issued him with a tax refund. A P50Z is a form to claim an income tax refund for people who have stopped work and flexibly access their pension. HMRC opened a self-assessment record, which it uses to collect income tax via a Self-Assessment Tax Return (SATR). The SATR is completed by individuals whose tax is not automatically deducted from their wages, pensions or savings, like Mr X in this case.

10. HMRC wrote to Mr X on 1 November 2017 to tell him that his second drawdown had increased his income to over £100,000, which meant he would need to input these details into his 2017 2018 SATR. HMRC says that Royal Mail returned this letter marked as ‘undelivered’, so HMRC set its ‘Returned Letter Service’ (RLS) signal, which means that it will send no more correspondence to that address.

11. HMRC reviewed Mr X’s record and removed the RLS signal. HMRC sent Mr X a 2018-2019 SATR on 28 November 2019. HMRC received the completed SATR from Mr X on 13 March 2020.

12. On 29 June 2020, Mr X called HMRC and asked about making a claim for tax relief to offset his business expenses incurred in the 2017-18 tax year. HMRC explained to Mr X that a 2017-2018 SATR was required, and a paper form was sent to him after the call. Mr X called again on the same day and the adviser told him that they would call him back. HMRC says that when the adviser tried to do so, Mr X’s number would not accept the call.

13. HMRC received a completed SATR for 2017-2018 from Mr X on 9 October 2020. Mr X told HMRC that he was operating on a ‘cash basis’, which means income is recognised only once it has been received rather than when it was earned. HMRC processed this information and amended the trading loss figure, which Mr X had contacted it about on 26 November 2020.

14. It was arranged that a technical adviser would call Mr X back on 1 December 2020. In the call, the adviser explained to Mr X that he could not offset his trading losses against other income operating on a ‘cash basis’, as HMRC guidance does not allow for this. The adviser explained how Mr X could amend his SATR, including confirming that he wanted to offset his losses against his income for the year 2017-2018.

15. Mr X sent his amendment on 2 December 2020. On 9 March 2021, HMRC wrote to Mr X and explained that a ‘S64 loss relief claim’, referring to section 64 of the Income Tax Act 2007, which bestows the right to claim trade loss relief, needed to have been made by 31 January 2020 and it therefore could not proceed.

16. Mr X appealed this decision on 12 March 2021. He said that in his various phone calls he had never been informed of ‘S64 loss relief’ and that the first time HMRC mentioned this to him was in its letter dated 9 March. He told HMRC that he was unwell between September 2019 and November 2020 and therefore should not be penalised. He also made a SAR to obtain call recordings relevant to this matter, which HMRC responded to on 12 April 2021.

17. HMRC responded to Mr X’s appeal, which it treated as a complaint, on 9 July 2021. HMRC explained to Mr X that its decision was correct and it could not be changed. It told him that it sympathised with his health problems, but the due date for the 2017-2018 SATR of 31 January 2019 predated his period of ill health.

18. HMRC also explained that the final date for any amendment and subsequent loss claim was 31 January 2020. HMRC noted that Mr X did not notify it of any anticipated self-employed income in his P50Z, which was required. HMRC apologised that, in the telephone conversation on 1 December 2020, Mr X got the impression that his amendment would be accepted, as no mention of the time limit was made.

19. HMRC told Mr X that he could ask for another review of his complaint by a different adviser at ‘Tier 2’ of HMRC’s internal complaint procedure. Mr X did so on 1 August 2021, stating that it was HMRC’s failure to furnish him with the 2017-2018 SATR in a reasonable timeframe that had caused this situation.

20. Mr X said that, in the call recordings he obtained, a conversation between two advisers could be heard in which one of them appears to be saying that it was not his fault that Mr X had not been sent the 2017-2018 SATR. Mr X said that he believes the statutory time limit could be relaxed as HMRC had failed in its duty of care and he was prepared to go to court. He also expressed his concerns about the quality of some of the recordings he had been provided with.

21. HMRC acknowledged this correspondence on 6 August 2021. On 27 October, HMRC apologised, as it was taking longer than expected to respond to Mr X’s complaint. HMRC then responded to Mr X’s complaint at Tier 2 of its process on 1 December 2021. HMRC reiterated its previous explanation regarding the statutory deadline for filing a SATR and any subsequent amendment.

22. HMRC accepted that the grounds of Mr X’s complaint were that he had not been provided with the 2017-2018 SATR for completion in time. HMRC explained to Mr X that Royal Mail had returned the letter it had sent to him on 1 November 2017, which explained the need for him to return a SATR, and that HMRC had therefore set its RLS signal.

23. HMRC said that the first sign it had received of self-employment was in October 2020 when it received the completed SATR from Mr X. HMRC said that individuals are obliged to notify it that they are commencing self-employment by 5 October of their business’s second tax year, which would have been in 2018 in his case.

24. HMRC again acknowledged that Mr X was not advised of the deadline when he spoke with HMRC on 1 December 2020, but said that this did not change the statutory time limit. HMRC issued a payment of £75 in acknowledgement of this error, the worry and distress caused, and the costs incurred.

25. Mr X was directed to the AO. Mr X complained to the AO in December 2021. He told it that HMRC did not take his business expenses (£45,945) into account. He repeated that, as he only received the SATR for 2017-2018 in July 2020, he could not have completed and returned it any sooner and that this was HMRC’s failure. He also said that the call recordings on the discs he had received were heavily redacted, indecipherable or missing altogether, with large periods of no transcripts. He asked if this was acceptable.

26. The AO acknowledged his complaint to it on 28 January 2022. It explained to Mr X that it could not investigate the contents of his SAR because it was not in its remit to do so. The AO referred him to the Information Commissioner’s Office (ICO) if he wished to pursue this part of his complaint.

27. The AO responded to Mr X’s complaint about the SATR on 16 March 2022. It did not uphold it. The AO explained that it was correct for his loss relief claim to be rejected, as it was not received in the timeframe stated in legislation. The AO explained that a 2017-2018 SATR was not automatically sent to Mr X as the RLS signal had been set. The AO told Mr X that this was not an error on HMRC’s part, as it is the taxpayer’s responsibility to notify HMRC when they are due to pay tax. The AO said that HMRC’s payment for poorly advising him was reasonable and in line with HMRC guidance.

28. Mr X then complained to our office on 4 April 2022.

HMRC’s refusal to pay a tax rebate for 2017-2018

32. When we consider 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 in Mr X’s case and have not found any signs that something went wrong.

33. We have considered why Mr X remains unhappy with HMRC’s actions following the AO’s final response to his complaint.

34. Mr X has told us that he disagrees with HMRC’s decision to deny his claim for tax relief for the year 2017-2018, as he was not sent the correct tax return until July 2020, after the deadline of 31 January 2020 had already passed.

35. Mr X has said that HMRC was wrong to send the letter dated 1 November 2017 that led to its RLS signal being set as an unregistered letter. He says that this constitutes ‘sub-standard practice’ by ‘changing the expected form of communication by sending an unregistered but time-sensitive letter’.

36. HMRC and the AO explained to Mr X that he was not automatically sent a tax return to complete for 2017-2018, as Royal Mail returned the letter that HMRC sent to him on 1 November 2017. HMRC therefore set its RLS signal, which means that correspondence is not to be automatically sent. HMRC further explained that it did not send him a tax return at the same time as this letter, as the tax year in question was not yet complete.

37. We can see that HMRC’s guidance on correspondence being returned to it as ‘RLS’, as referenced above, says that:

‘The […] RLS team will • Carry out initial checks for a later address • If a later address is found, they will update the address on Taxpayer Business Service (TBS) and reissue the returned correspondence if appropriate

If no later address can be found, they will

• Set the RLS signal against all instances of that address on TBS’

38. We can therefore see that HMRC correctly applied its own guidance once Royal Mail had returned the letter that HMRC sent on 1 November 2017. We cannot speculate as to why Mr X did not receive the letter.

39. We have considered Mr X’s complaint that HMRC did not send this letter via recorded delivery. We have undertaken a proportionate search of the HMRC Self-Assessment Manual and cannot see that it contains any requirement to send letters via this method.

40. We have not seen anything to suggest HMRC has a specific general policy on its method of outgoing correspondence, and the absence of any such provision in the Self-Assessment Manual tells us that it has no obligation to send relevant correspondence via recorded delivery as standard.

41. We are therefore satisfied that HMRC acted in line with our ‘Principles of Good Administration’, which explain that we expect an organisation to ‘get it right’ by following its ‘own policy and procedural guidance, whether published or internal’. Those principles also explain that public bodies should act judiciously with public funds, and ‘spend public money with care and propriety’. This is also in keeping with the principles set out in the HM Treasury guidance ‘Managing Public Money’.

42. As such, we cannot see that HMRC did anything wrong by setting the RLS signal and not sending either the original letter or any copies via recorded delivery.

43. Following on from this, HMRC has explained to Mr X that whether or not he received this letter, it is a taxpayer’s responsibility to inform HMRC that they have income on which tax is payable.

44. We can see that this responsibility is set out in section 7 of the Taxes Management Act 1970, which says:

‘Every person who—

(a) is chargeable to income tax or capital gains tax for any year of assessment, and

(b) falls within subsection (1A) or (1B), shall, subject to subsection (3) below, within the notification period, give notice to an officer of the Board that he is so chargeable.

1A) A person falls within this subsection if the person has not received a notice under section 8 requiring a return for the year of assessment of the person’s total income and chargeable gains.’

45. Section 8 of the Act referred to in the extract quoted above says that:

‘(1D) A return under this section for a year of assessment (Year 1) must be delivered— (a) in the case of a non-electronic return, on or before 31st October in Year 2, and (b) in the case of an electronic return, on or before 31st January in Year 2.’

46. We can therefore see that HMRC and the AO are correct to say that it is for the taxpayer to ensure that HMRC is notified of their liability to pay income tax, and that the tax return in Mr X’s case for the tax year 2017-18 had to be filed no later than 31 January 2019.

47. We understand Mr X’s frustration not only that the letter HMRC sent to him on 1 November 2017 did not reach him, which meant that he was not reminded about his obligation to file a SATR, but also that he was not automatically issued with a paper copy to complete for 2017-2018.

48. We can see that HMRC does not have any statutory obligation to take these steps, and the reminders it does send serve only as a courtesy. In our view, HMRC and the AO have correctly explained Mr X’s own legal obligations to him.

49. We therefore cannot see that the late filing of Mr X’s 2017-2018 tax return is due to any failing on the part of HMRC. Where someone has difficulty following their tax responsibilities, they may engage professional services, such as those of an accountant.

50. As a result of missing the deadline to file his 2017-2018 tax return and, in turn, his amendment to it, Mr X was told that he could not claim tax relief for that tax year to account for the expenses he incurred in the development of his new business.

51. HMRC and the AO have explained to Mr X that it cannot accept his request for tax relief outside of the deadline, as it cannot override legislation. It has explained to Mr X that, to claim tax relief for the year 2017-2018, his tax return must have been filed by 31 January 2019 and any amendment to it by 31 January 2020, which we have already established is correct.

52. We can see that the relevant legislation for claiming tax relief can be found in section 64 of the Income Tax Act 2007, which says that ‘the claim must be made on or before the first anniversary of the normal self-assessment filing date for the loss-making year’.

53. We can see not only that what HMRC and the AO have told Mr X is consistent with this legislation, but also that this legislation provides no discretion for HMRC to act outside of it.

54. We therefore cannot see that HMRC did anything wrong by, first, telling Mr X that it could not process his claim for tax relief, because he had missed the deadline to do so, as set out by legislation, or, second, by choosing not to act outside of this legislation, because it had no authority to do so.

55. Mr X tells us that there must be a way around the legislation, as the error was not of his making but was caused by HMRC. For the reasons set out above, we have seen neither that the error was caused by HMRC nor that there is any discretion in the legislation even in those cases where HMRC may have made a mistake.

56. In summary, we have looked at HMRC’s actions and found that it followed its own policies and legislation in Mr X’s case. We cannot ask HMRC to interfere with this legislation or to consider acting outside of it owing to Mr X’s personal circumstances.

57. We know that Mr X feels strongly that the legislation leaves him in an unfair position. The most appropriate way for Mr X to challenge legislation, or HMRC’s guidance, would be for him to raise this issue with his MP’s office and ask that they discuss it in Parliament.

58. We understand that Mr X is disappointed that he is unable to claim tax relief for the year 2017-2018. We hope that Mr X is assured that we have listened to his concerns and feels we have clearly explained how and why we have reached this conclusion, even if we did not reach the conclusion that he hoped for.

AO’s consideration of Mr X’s complaint and the contents of Mr X’s SAR

59. We have considered why Mr X is dissatisfied with the AO’s handling of his complaint about HMRC. Mr X has complained to us about the AO’s ‘reluctance’ to listen to the contents of the SAR that he obtained from HMRC, and that he believes the AO has breached his rights by not upholding his complaint.

60. We can see that in Mr X’s complaint to the AO, he told it that some of the call recordings on the disc HMRC provided to him in response to his SAR are heavily redacted, indecipherable or missing altogether, and ‘have large periods of no transcription’.

61. In its acknowledgement to his complaint on 28 January 2022, the AO referred Mr X to 5.12 of its Service Level Agreement, which says that it cannot look at complaints about ‘the handling of requests under both the Freedom of Information Act 2000 and the Data Protection Act 1998 - such issues are referred to the Information Commissioner’. The AO then suggested Mr X contact the ICO if he wished to pursue a complaint about the contents or general handling of his SAR.

62. As Mr X has explained in his complaint to us, the AO has addressed the contents of the key telephone conversations he wanted it to consider, namely the conversations that occurred on 29 June and 1 December 2020. The AO also confirmed to us on 1 December 2022 that it did listen to these phone calls between HMRC and Mr X during its investigation.

63. We are therefore satisfied that when the AO told Mr X that the contents of his SAR were not in its remit, it was referring to his specific complaint about the quality of the recordings provided, as explained above. The AO correctly directed Mr X to the appropriate forum to address his concerns by advising him how he can complain to the ICO.

64. With regard to Mr X’s complaint that the AO was wrong to not uphold his original concerns, we can see from the evidence available that the AO considered all the relevant evidence Mr X provided in reaching its decision about his complaint, evaluating it in the context of the relevant standards and explaining its findings. This is all in line with our Principles of Good Complaint Handling, which say that organisations should act ‘fairly and proportionately’ by investigating complaints ‘thoroughly and fairly, basing their decisions on the available facts and evidence’.

65. We understand that Mr X is frustrated that the AO was unable to overturn HMRC’s decision, based on what it had seen. We hope this explanation assures Mr X that, from what we have seen, the AO appropriately considered his evidence before reaching the decision that it did.

66. With the above in mind, we have decided to take no further action with this case.

1. We have carefully considered Mr X’s complaint about HM Revenue and Customs (HMRC) and the Adjudicator’s Office (AO). We understand Mr A continues to feel frustrated that he has not been granted a tax rebate he believes he is entitled to. We can see this has been heightened by his worry that the AO did not consider all the evidence he had provided to it. We were sorry to hear about how these events have affected him.

2. Having considered all the available evidence, and the relevant guidelines and legislation that tell us how HMRC and AO should carry out their work, we have decided to take no further action. This is because we have not seen any signs that HMRC did not act in line with the guidelines and standards.

3. We will explain our decision in more detail below.