4. Ms O complains that HMRC is charging her interest and late payment penalties for tax she did not know she was required to pay.
5. Her finances have been affected as a result of this and the ongoing dispute has been worrying and stressful.
6. Ms O would like all fees and interest to be cleared from her account. She would also like to know why she has to pay more tax and for her future tax to be capped at 40%.
7. During the 2021/22 tax year Ms O earned in excess of £100,000. Although she was a PAYE employee, this level of income required her to complete a Self-Assessment (SA) tax return. It is the taxpayer’s responsibility to be aware of their obligations and information about this requirement is available in the public domain.
8. Ms O tells us did not know she needed to file a SA return until HMRC sent her notification to do this in September 2022. When she did this, she became aware that she had underpaid tax by £4,398.10 in 2021/22.
9. Because this was not paid, and because Ms O had not filed the return by the required deadline, HMRC added interest and fees to her account. Ms O appealed this in December 2023 and, on 5 March 2024, HMRC wrote to her to tell her it had cleared the interest and fees.
10. The underpayment, minus the additional charges, was due to be paid by 21 March. Because this was not done, HMRC has added interest and late payment penalties since this time. It continues to do so.
11. Ms O overpaid tax by £1,247.56 during 2022/23. HMRC has offset this against the earlier underpayment, reducing the sum – before interest and penalties – to £3,150.54.
12. Ms O complained to HMRC about the additional charges she has incurred. It explained that she cannot challenge the interest claimed until the underpayment is cleared in full. It has also advised that her appeal against the penalties has to be dealt with via the appropriate process, which is a Tribunal hearing via the statutory appeals process.
13. As she was unhappy with HMRC’s response to her complaint, Ms O referred this to the Adjudicator’s Office (AO) as the next step in the HMRC complaints process. The AO agreed with HMRC’s position and explained that, in its role, it could not look at matters which could be considered by a Tribunal. It also said HMRC was required to charge daily interest by law and any request for this to be cleared could only be considered once the underpayment was paid.
Interest charges
16. 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 and have not found any indications that HMRC failed to act in line with applicable guidance in deciding to charge Ms O interest on her tax underpayment. It was also acting in line with its guidance in advising her that she would have to clear the underpayment before it could look at whether it should clear the interest charges.
17. HMRC’s ‘Debt Management and Banking Manual’ (DMBM) explains ‘If tax is paid late we have a statutory obligation to charge interest. There is no appeal route for disputes about interest. But we will, in certain circumstances, consider giving up some or all of the interest if a customer objects to the charge or a review identifies that a HMRC mistake or unreasonable contributed to some or all of the build-up of interest.’
18. The DMBM goes on to say that it is for its Interest Review Unit (IRU) to consider doing giving up any interest due. It explains that it will only do this ‘where the interest charge is final, that is, it is not accruing’.
19. Interest due on unpaid tax is calculated daily. Once Ms O pays the outstanding tax due, no further interest will be applied to her account. It is at this point that the IRU would be able to consider her claim for the interest charges being cleared.
20. We acknowledge Ms O’s concern about the sum she owes continuing to rise, and we understand that she is very worried about this. HMRC has acted in line with applicable guidance and standards, and we have not seen anything within the DMBM that allows it to reach any different view. It has applied daily interest, as it has explained it is obliged to by law, and has accurately explained it cannot consider clearing any of this until the underpayment is cleared. It has provided Ms O with correct information and so we will take no further action.
Penalties
21. The law which tells us how we must conduct our work, the Parliamentary Commissioner Act 1967, says we cannot investigate a complaint where a person has (or had) the option to take legal action, unless we consider this is (or was) unreasonable in the circumstances.
22. Section 26 of the Finance Act 2021 states that a taxpayer will be subject to penalties where they fail to make payment of taxes due by a specified time. It goes on to state that these can be appealed via Tribunal. This means that Ms O has a legal route available to her and, given the change of decision she seeks regarding her liability in law to pay the penalties, which is an outcome only a judicial forum can achieve for her, it is reasonable for her to pursue that route.
23. We have considered whether there is any reason it might not be reasonable for Ms O to pursue a legal route. However, we understand Ms O is aware that this is the appropriate route to follow and has appealed to the Tax Chamber for a tribunal hearing. She is currently waiting for this to be listed. As such, we understand she agrees it is reasonable for her to pursue this route as she is already in the process of doing so. She has not told us of any reason why it would not be reasonable to pursue that route.
24. Because there is a specific course of action set out within the law for Ms O to dispute this aspect of her complaint, and she is following this to achieve the outcome she seeks, we will take no further action.
25. With the above in mind, we will take no further action in this case. We know that Ms O remains upset and concerned about her tax liabilities, so we hope we have clearly explained how we thought about what she told us and how we reached our decision in this case.
1. We have carefully considered Ms O’s complaint about HMRC. We were sorry to hear about the difficult experience she has had in her dealings with HMRC since 2022.
2. After having thought about everything available to us, we have decided we will not consider the complaint further. This is because HMRC has acted in line with applicable guidance and standards in advising Ms O that it cannot look at her complaint about the interest charged until she has cleared the overpayment due.
3. Additionally, Ms O is following the specific legal route of appeal available to her to consider her complaint about late payment penalties being applied, which it is reasonable for her to do to achieve the outcome she is looking for. The law prevents us from looking at issues like this, so we will take no further action. We explain further below.