Good try

PRAISE FOR THE way that HMRC managed to implement the inevitable changes arising from the merger between the Inland Revenue and Customs, rang forth from the Adjudicator's 2006 annual report. Dame Barbara Mills DBE, QC said that this was done so that 'disruption to the existing complaints handling processes and hence to complainants' was minimised. She also said that HMRC is conducting an internal review of how complaints should be handled, and that the Adjudicator's Office will 'continue to work with HMRC to monitor progress and help ensure successful implementation of the review's recommendations'.

Inevitably tax credits get an early mention in the report. Dame Barbara said that the Adjudicator's Office had again received a large number of complaints about tax credits, 'covering the same range of problems' as highlighted in the 2005 report. The office upheld either fully or partially 74% of complaints which were dealt with by the tax credit office; this is slightly better than 2005 when the equivalent figure was over 80%. However, she said that HMRC was undertaking a 'programme of work' that should 'over time deliver significant improvements'. It would take time because 'inflexibility with the IT system constrains the quick delivery of some of the most desired changes', thus some delay may occur before the full impact of the changes will be seen.

Self appraisal

It is all very well the Adjudicator appraising the departments whose complaints her office handles, but how does her office stand up in terms of efficiency and satisfaction? In her report, Dame Barbara said that the 'large increase in the number of tax credits complaints' that her office has to cope with, meant that it had had to 'deal with many more complaints than ever before'. Stunningly, the office settled 926 cases in 2005-06, compared with 581 the previous year. In addition, the number of cases settled that were older than 44 weeks was reduced from ten in 2004-05 to three, and the average turnaround time for settling all investigation cases was 19.7 weeks, down from 20.74 weeks the previous year. All this was achieved without extra help.

As to customer satisfaction, the Adjudicator's Office carries out telephone surveys on completion of investigation. The results for 2005-06 showed that 76% (69% in 2004-05) of complainants agreed that the office provided them with clear advice. 45% were happy with the outcome of their complaint, which is an increase of 3% from the previous year. Showing slight reductions in satisfaction, 79% of claimants agreed that the office explained its decision fully, compared with 82% in 2004-05, and 66% agreed that the office had investigated their complaint thoroughly compared with 69% in the previous year.

It is not particularly surprising that less than half of complainants are satisfied with the outcome of their complaints. The percentage almost matches exactly the number of HMRC complaints upheld, the department about which most complaints are received. Complaints which are not upheld are unlikely to be met with delight, although it should be noted that even if unhappy with the final outcome, the figures relating to complaint handling are considerably higher. Overall, the percentage of complainants satisfied with the service received was 72%, which is a rise from 66% in 2004-05.

The Adjudicator's Office also surveys the departments complained about. The report says that while the response rate from the smaller organisations is always high, 'certain parts of HMRC did not submit a response this year' which seems lamentable. The departments which did respond were all satisfied with the quality and value of information provided.

HMRC

In total, the Adjudicator upheld 44% of complaints concerning HMRC. As in previous years the application of Extra-statutory Concession ESC A19 and tax codes gave rise to a sizable number of problems, viz 13%. Investigations and enquiries accounted for 4% of complaints and VAT assurance work for another 4%. However, the overwhelming area for complaints remains tax credits, being responsible for 52% of complaints, and most of these concerned the recovery of overpayments.

The report always includes a few case summaries which make for interesting reading. This year's report includes a couple of cases concerning complaints about call centres and helplines. These are a huge source of frustration to a large number of taxpayers and tax credit claimants. There are few things more infuriating than being placed in a queue and listening to muzak that makes you want to scream. Then, assuming that you do not give up, when an adviser takes your call, he or she may indeed be polite and professional, but often cannot help. Oh for the days of being able to speak to the tax officer specifically dealing with your or your client's affairs. Progress indeed.

In the first complaint summarised, Mr E said that the service provided by the tax credit helpline was 'useless', with the adviser on separate occasions being unprofessional, fobbing him off, not listening, and being offhand and rude. The complaint was not upheld. The Adjudicator managed to get hold of recordings of Mr E's calls to the helpline and found that the advisers had been polite and professional.

The complainant in the second case summary said she had been poorly advised by the tax credit helpline. This complaint was upheld. Although the helpline had no trace of the initial call made by Mrs F, she had a telephone bill confirming it had been made. However, the helpline accepted that Mrs F had been given misleading information and agreed to pay her £450 compensation.

ESC A19

Under Extra-statutory Concession A19, HMRC can write off tax when they have failed to make timely and proper use of information received. Problems in this area seen by the Adjudicator often stem from HMRC failure to amend tax codes on receipt of information. However, problems also arise when the employer applies the wrong code, or taxpayers or their advisers make mistakes.

This year, the Adjudicator investigated a number of complaints from retired taxpayers with more than one source of income. HMRC have not, in these cases, set up appropriate arrangements for each source to be taxed correctly. The Adjudicator has suggested that preventing the problem arising at all is the best solution and has asked HMRC to consider drawing the attention of taxpayers approaching retirement that they are required to check that each source of income is being taxed correctly. HMRC's response was awaited at the time of writing the report.

A case summary concerned Mr H. He had retired and received a company pension and a state pension. He later was re-employed, taking his sources of income up to three. HMRC made mistakes in dealing with these sources with the result that Mr H underpaid tax for six years. He was then presented with a substantial tax bill. HMRC agreed that they had made mistakes and offered Mr H appropriate redress. The tax arrears would be collected over three years and he was paid £135 in recognition of worry and distress. Mr H wanted HMRC to give up the tax and complained to the Adjudicator. The complaint was not upheld because Mr H had received information with his tax codes over the years that should have made him realise he was not paying the right amount of tax.

Investigations

Investigations are inevitably another source of complaint. In one summary, Mr I complained about the time an investigation took and the conduct of the Inspector. The Adjudicator did not uphold the complaint. The delays had mainly been caused by the Inspector's sick leave and the taxpayer's agent had not found it necessary to contact the Inspector to find out what was happening. Assertions that the Inspector had questioned the honesty and integrity of Mr I's accountant did not, according to the Adjudicator's investigation, have any foundation. Overall, there was no reason to reimburse any part of the fees paid to the accountant, nor should HMRC pay any more compensation than the £25 it had already paid.

Another case was upheld. The complaint concerned the delay by Special Compliance Office in transferring the papers to the civil investigations team and telling Mr J that the criminal investigation had been stopped. SCO, having already offered to pay Mr J £500 in recognition of worry and distress caused by the delay, agreed to pay another £500 for the delay in telling Mr J that the criminal investigation was to be discontinued and offered to pay costs of £2,000. The Adjudicator found that SCO had not handled Mr J's complaint well, and that it was not clear to which delay the first £500 related. SCO also agreed to contribute to the fees of the solicitor engaged by Mr J to handle his complaint. It also agreed to an ex gratia payment to cover interest charged for period covered by its delays.

Value added complaints

Again, complaints about the former Customs have reduced. Following on from the 13% fall in 2004-05, this increased to 29% in 2005-06. Complaints about VAT tend to centre around misdirection or misleading advice from VAT officers. For example, a summary of a complaint upheld by the Adjudicator concerned a partnership providing tuition through a third party. The partners claimed exemption, without telling HMRC who specifically did the teaching. HMRC agreed and repaid the VAT overpaid in the past three years. In the course of the correspondence, the partners had told HMRC about the third party providing lessons. At a future VAT assurance visit, the officer found that because the partners did not personally provide the teaching, VAT was due. HMRC issued an assessment for VAT underpaid since their last ruling. They refused the partners' claim that VAT should not be paid for that period since they had been misdirected by HMRC. HMRC said that because the amount previously refunded was greater than the amount now due, there was no overall loss to the partners. Thus the relevant extra-statutory concession did not apply.

The Adjudicator thought that HMRC's interpretation of the ESC was unconvincing and asked HMRC to check with their policy advisers. They said that the original repayment should not be taken into account, as it was made some years ago and would not be available to pay the current assessment. The cost of the lessons would be the same regardless of VAT being charged, so it was not feasible for the partners to recover the VAT underpaid from their clients. Thus having to pay the assessment would cause loss. HMRC agreed to withdraw the assessment and paid the partners £100 in recognition of their poor complaint handling.

Stamp duty

The report states that there has been a notable increase in the number of complaints received about HMRC's Stamp Office. In one case, despite the correct paperwork and payment having been submitted in time, Stamp Office issued the taxpayer a penalty notice. Although it accepted that the notice should not have been issued, it would not apologise or reimburse the taxpayer the additional costs incurred in dealing with the notice. The taxpayer's conveyancer complained to the Adjudicator. When looking at the relevant papers, the Adjudicator saw that the form had been completed correctly online, but the conveyancer had made manual amendments to the form. The Stamp Office specifically warns against making manual amendments since its system will not be able to process them. Thus the Adjudicator did not uphold the complaint, on the basis that the Stamp Office had not done anything wrong.

Fair dealings?

As the Tables show, the Adjudicator also deals with the Valuation Office, the Public Guardianship Office (to be replaced in April 2007 by the Office of the Public Guardian … !) and the Insolvency Service. Relatively few complaints are received in connection with any of these departments. They and HMRC accepted all the Adjudicator's rulings. The Adjudicator mentioned in her report how receptive the Insolvency Service is to feedback and its 'preparedness to consider our views and to implement changes to their working practices, where they agree that this could lead to improvement'.

The Parliamentary and Health Service Ombudsman, Ann Abraham, published her annual report for 2005-06 in July. Her department considers complaints relating to all Government departments, and she too received a large number concerning tax credits. In 2005, she published a separate report on the subject, concluding that public bodies need to take into account the public's perspective when designing and implementing new systems. She comments that HMRC was 'reluctant to accept' that they were guilty of maladministration, but were 'now responding with some substantial changes to the administration of the system'. They were also improving the complaints handling service. However, the Ombudsman accepted 404 complaints concerning tax credits for investigation in 2005-06, upholding 90% of them. In addition, she accepted 144 complaints on other HMRC matters, but upheld only 30% of these. She said of these, that many 'would never have got as far as the Ombudsman if they had been handled properly in the first place'.

The Ombudsman tends to use more strident language in her report than the Adjudicator. The moral is that the relevant departments must take complaints seriously and have a competent system for dealing with them. Complaints should be welcome because they are an effective way of informing how services can be improved. Given that the public departments are there for the benefit of the public, the services that they provide have got to suit the public, not the other way round. When the Adjudicator's Office was introduced in 1994, the Revenue and Customs used to issue press releases commenting on the annual reports. This practice ceased some years ago. Perhaps they feel that there is nothing more to say. But it seems to me that a little humility would do no harm.

It is good that the departments seem open to points made by the Adjudicator, and it seems very practical for HMRC to involve her in their complaints review. She can more easily step back and take a non-partisan view. As the Adjudicator says in her report, particularly with ESC A19 cases and tax credit overpayments, the arrears are legally payable. The problem is that complainants are 'often left with a sense of grievance' because their liability was drawn to their attention late or with tax credits, the overpayment resulted from HMRC mistakes. It is very easy for HMRC to forget the human being at the end of the tax return or tax credit claim. Matters concerning money are always emotive, and perhaps a little more understanding would help.         

Issue: 4072 / Categories: Comment & Analysis , Admin , Land & property