HM Revenue and Customs

4. Mr L complains that HMRC took 267 days to refund his overpaid tax of £64,000 and refused to pay him the interest on his mortgage he incurred as a result. He also complains HMRC wrongly advised him in a phone call on 15 June 2022 and delayed in responding to his complaint

5. Mr L tells us he incurred interest of £696 on his mortgage during the period of delay. He also experienced frustration at the delay in handling his complaint and poor communication and the entire experience had a negative impact on his mental health.

6. Mr L would like HMRC to carry out a root cause analysis of what went wrong. He would also like an apology and a refund of the additional interest he had to pay on his mortgage.

7. Mr L tells us that he was made redundant in early 2021 and, on reviewing his finances, he realised he would be paying more tax than he was liable for. He wrote to HMRC on 20 December 2021 asking for an adjustment in his tax bill and applying for Venture Capital Trust (VCT) investment tax relief. Venture capital schemes offer tax relief to individuals to encourage them to invest in companies and social enterprises that are not listed on any recognised stock exchange. Mr L told us he had frequently invested in these schemes and had always had an efficient service from HMRC when dealing with his tax relief.

8. On 7 April 2022, he filed his annual tax return and once again sought to claim the tax relief.

9. On 15 June 2022, Mr L called HMRC and after being on hold for 35 minutes he was told that his account had wrongly been removed from self-assessment but there was no indication why. He was advised this error had been corrected during the call and his request for tax relief would be processed within the next ten weeks. He filed an online complaint the same day, explaining that he was dissatisfied with the service he had received and sought explanations and compensation for the seven months since he had first requested tax relief in December 2021. He said the delay had left him out of pocket.

10. When he did not receive a response he wrote to his MP on 31 July 2022 and asked for their help. The MP contacted HMRC on 1 August 2022 on Mr L’s behalf. On 16 September 2022, HMRC responded to the complaint, apologised for the delay in responding, and explained that the reason he had been removed from self-assessment was because he had not met the requirement of exceeding the threshold of £100,000 adjusted net income in tax year 2020-21. It also added that the call handler could have made a request to the relevant HMRC team that the repayment of overpaid tax be paid immediately, rather than Mr L having to wait further. The letter confirmed the repayment had now been issued and offered Mr L £100.

11. On 26 September 2022, Mr L contacted HMRC again to ask his complaint be considered at the next stage of the complaint process. He explained that he was not satisfied that all aspects of his original complaint had been addressed and that he sought a more detailed explanation of why the digital tax return became ‘stuck’ without any action being taken. He also explained that he had intended to make payments on his mortgage and the 9 months it had taken for him to get his refund had meant he had accrued interest on his mortgage balance during that time. He said he saw no reason why he should not be reimbursed that money.

12. On 12 October 2022, HMRC responded explaining that it must carry out certain checks when it receives an ‘unsolicited tax return’ to make sure the refund has not already been issued through the PAYE system. It said Mr L should have received updates whilst that was happening and apologised that he did not. It also added that, in order for it to consider his claimed losses on his mortgage, he would need to provide evidence that he had agreed to make that deposit to his mortgage account sooner than he did.

13. On 14 November 2022, Mr L provided a copy of his mortgage agreement and evidence that since receiving the tax refund he had made payments to his mortgage account to the sum of the tax return. He also calculated that he had paid an additional amount of interest on the mortgage to the sum of £696.

14. HMRC provided a response to Mr L on 2 March 2023, which advised it had seen no evidence he had agreed with his provider to make the payment on his mortgage during the period he was waiting for the tax relief. As a result, it considered the claimed loss to be speculative and so explained it would not provide the requested payment.

15. The response directed him to the Adjudicator’s Office (AO) as the next step in the complaints process if he was not satisfied with HMRC’s reply. He did so the same day, and on 26 July 2023 he received the AO’s report. The AO partly upheld his complaint, as it agreed there had been some errors in HMRC’s service and recommended HMRC made a further financial payment. However, it said HMRC had been correct not to pay him amount he sought for the claimed loss of the amount paid on mortgage interest. Mr L then brought his complaint to our Office.

Took 267 days to refund his overpaid tax of £64,000

19. Mr L tells us he had been completing self-assessment tax returns for around 20 years and so was surprised it took so long for HMRC to provide the repayment and to find that he had been taken off self-assessment. He tells us he found HMRC’s explanation bemusing.

20. In HMRC’s response of 16 September 2022 it explained that the threshold for requiring a self-assessment return to be filed was when income was in excess of £100,000. Mr L’s income for the tax year 2020-21 was exactly £100,000, so he did not trigger the need for a self-assessment return and so the self-assessment record was closed.

21. When HMRC closed Mr L’s self-assessment record it sent him a letter explaining that a self-assessment tax return no longer needed to be filed. It added that, if he did need to file a tax return at any point in the future the record could be reactivated, but he would need to open a new online account. Mr L did not do that, which meant that when he filed a self-assessment return in April 2022 HMRC needed to carry out checks as it was an unexpected filing. The file was marked as ‘no repayment’ whilst those checks were carried out and the repayment was issued on 6 September 2022.

22. Mr L told us that it had been his intention to use the repayment to pay down his mortgage and so the delay resulted in him incurring interest that he would otherwise have avoided. As we explained in the background section above, HMRC asked him to provide evidence that he had made a prior agreement with the mortgage company to pay the tax refund to it and/or that he would incur penalties or additional costs if he did not make that payment.

23. Mr L has not shown that he was required to make the mortgage payment or else be penalised. Rather, he explained he had made a choice to manage his finances in that way. We have referred to HMRC’s CRG policy and can see section CRG5125) explains HMRC has no obligation or responsibility to make payments for hypothetical or speculative loss.

24. Having thought carefully about the facts of Mr L’s complaint, we can see HMRC has acted in line with its policy as it has considered the evidence available and concluded that the interest paid on the mortgage from December 2021 to September 2022 to be a hypothetical and speculative loss. It has explained how it considered the specifics of Mr L’s request and the evidence provided, and how it reached its position with reference to the applicable guidance, so we have not seen any indications of maladministration.

25. Mr L would have been in a better financial position had he been able to pay off the mortgage sooner, which was his preferred course of action and, in the absence of a clear commitment to his mortgage provider, advising that he would have taken certain action is speculative as there is nothing to demonstrate those funds would not have been used for a different purpose.

26. Mr L has said he was not aware he had to tell HMRC what he intended to use the tax refund for in advance. Under its policy, HMRC will only consider actual loss that can be demonstrated as having come about as a direct result of delay by HMRC. Mr L would therefore need to show that there was an agreement by which he was penalised for failing to make the mortgage payment by a certain time. HMRC has explained why the usual accrual of interest through the term of a mortgage, in line with agreed terms and conditions, does not constitute actual loss for these purposes.

27. HMRC does have guidance for providing compensation for loss of opportunity for customers to access their funds when there is a delay in making a repayment. This is set out in its PAYE manual, section PAYE91085. It says:

‘The Income Tax (Earnings and Pensions) Act 2003 provides for a payment in compensation to be made where there is a delay in making a repayment. The Act calls this payment a repayment supplement. It is referred to in this subject as supplement.

Supplement is payable on all overpayments, not just those where a payable order is actually issued, and is calculated on a daily basis. Supplement is given when

• A repayment is made for a tax year. This includes a repayment made by formal set-off (R90 procedure) against arrears And • The repayment is made after 31 January following the end of the year of assessment’

28. In this case, payment was made in September 2022 for the assessment year 2021-2022. Therefore, Mr L does not qualify for compensation under this route as he received the repayment within the timeframe set out within the above guidance.

29. With this in mind, we have not seen any indications that HMRC failed to act in line with its guidance in considering Mr L’s request for an additional payment to reflect additional mortgage costs.

30. In regard to the time it took to process his request of 20 December 2021, the HMRC Charter says ‘We’ll answer your questions and resolve things first time, or as quickly as we can’.

31. Whilst there is no specific standard for a response time to requests for repayment of tax, our Principles of Good Administration say ‘Public bodies should behave helpfully, dealing with people promptly, within reasonable timescales’. We have therefore considered whether the evidence available shows HMRC handled the request promptly and in reasonable time.

32. The AO’s report identified that some avoidable delays on the part of HMRC did occur. It considered that the apology and £100 HMRC offered to put right the frustration caused by those delays was appropriate and in line with HMRC’s CRG.

33. As such, we can see HMRC did not always act in line with our Principles of Good Administration, and we agree this likely caused Mr L some avoidable frustration. We have considered that impact and the remedy HMRC offered later in this statement.

Misadvised him in a phone call on 15 June 2022

34. HMRC accepts that the call handler who spoke to Mr L on 15 June 2022 should have removed the restriction and issued the payment to Mr L. The fact he did not do so led to a further delay to Mr L receiving his payment.

35. The HMRC Charter says, ‘We’ll give you accurate, consistent and clear information.’

36. In this instance, the call handler did not give accurate information and this is an indication of maladministration. We will look at the impact on Mr L and what actions HMRC took to remedy that at the end of the statement.

Delayed in responding to his complaint

37. Mr L told us he was frustrated by the delays in responding to his complaint, having to engage his MP at one point to try to encourage HMRC to reply.

38. The HMRC internal manual ‘Complaints Handling Guidance’, section CHG615 ‘Standards of service for dealing with complaints: Response times’ says it should aim to ‘acknowledge the complaint within the time frame set by your business area’ and ‘resolve the complaint at the earliest opportunity in the complaint journey’.

39. HMRC has confirmed its complaints business area has a service standard of 15 working days to respond to a complaint. CHG615 goes on to say:‘If it becomes clear that you will not be able to provide a full reply within a reasonable timescale (for example due to the complexity of the complaint or the work needed to gather relevant information) send an interim response and explain our progress to date and any outstanding actions. Provide regular updates if necessary’.

40. We can see that it took three months for HMRC to provide a response to Mr L’s first complaint. It provided a response to his Tier 2 complaint within the 15 working day target but took over three months to respond to the follow-up complaint of 14 November 2022.

41. We can also see from the evidence available to us that HMRC failed to provide updates at the Tier 1 stage of the complaint and when Mr L wrote to it again on 14 November 2022.There are multiple failings in this aspect of the complaint. We will look at the impact on Mr L and what actions HMRC took to remedy that in the following section.

Impact of errors on Mr L and remedy

42. Having considered the above, we can see HMRC provided inaccurate information to Mr L in the phone call of 15 June 2022 and took until 6 September 2022 to act on his repayment request of 20 December 2021.

43. It acknowledged this and apologised in its letter of 16 September 2022, and it gave Mr L £100 in recognition of this poor service. There were also two occasions where HMRC delayed in responding to Mr L’s complaints for three months and also failed to send him updates during those periods. The AO acknowledged these failings and asked HMRC to provide an additional £50 in redress for falling short of its service standards.

44. Having thought about the errors we have identified, we can see that the poor service Mr L received caused him some frustration and distress. We have therefore thought about what HMRC has done to put things right.

45. Having carefully considered our ‘Guidance on Financial Remedy’ we can see that an apology and a financial remedy of £150 is appropriate to put right the impact of frustration caused to Mr L. It is also in line with our ‘Principles for Remedy’, which say organisations should put people back in the position they were in before the error occurred or compensate them appropriately.

46. Mr L said he wished to have a root cause analysis carried out of the reason for the issues he faced. We have looked at the explanations provided by HMRC and the AO and can see that both organisations have investigated and identified the errors and how they occurred, which is what a root cause analysis would seek to achieve. HMRC has also taken steps to ensure the call handler receives additional training on the appropriate guidance.

47. This is in line with our ‘Principles for Remedy’, which say organisations should provide an explanation of changes made to prevent maladministration or poor service being repeated.

48. For the reasons set out above, we have decided to take no further action with Mr L’s complaint. Where HMRC made mistakes in its service, we can see it has appropriately recognised its errors and taken appropriate steps to learn from the complaint and put things right. We know Mr L continues to feel frustrated and upset by his experience with HMRC, so we hope we have clearly explained how we have reached our decision in his case.

1. We have carefully considered Mr L’s complaint about HMRC. We were sorry to hear of the difficulties he has experienced in relation to his tax refund and the handling of his complaint about that matter. We can see from the information he has shared with us that these matters have caused him frustration and distress.

2. We have considered the evidence available to us and can see that HMRC made some mistakes in this case. We can also see that it has recognised errors in its service and offered a financial remedy of £150 and an apology.

3. Having thought about the steps HMRC has taken, we can see this is appropriate action to put right the impact caused by its mistakes and so will take no further action. We explain in more detail below how we reached this decision.