HM Revenue and Customs

4. Mr M complains about HMRC’s actions in July 2019. He tells us he has been getting Invalidity Benefit (IB) since 1993 and got a letter from HMRC in July 2019 stating it had included a taxable deduction in his tax code for this, effective immediately. He tells us this is incorrect as he had previously got a letter from HMRC in July 2011 stating the benefit was not taxable and would not be included in his tax code.

5. He tells us he asked HMRC to explain why this happened and says he has not received a satisfactory response. He is also dissatisfied that documents relating to the 2011 decision have been destroyed.

6. He tells us his general health has deteriorated rapidly over the last two years, and he would like financial compensation.

7. IB was a benefit created in 1971 and paid to people who had been invalided out of their trade or occupation after getting an injury or developing a long-term illness. It was replaced in 1995 by Incapacity Benefit, which the Government started to phase out in 2008 by moving claimants on to Employment and Support Allowance.

8. Mr M’s IB claim began in 1993. After being notified about the change in July 2019, Mr M contacted HMRC for information about the change and says he did not get a response. Mr M says that HMRC later told him the documents relating to the 2011 decision had been destroyed.

9. Mr M says he got a letter from HMRC dated 20 July 2011 informing him his 2011¬-12 tax code had been amended and his State Pension (SP) had been removed. The letter explained IB usually changes to SP when the recipient reaches 65 and said Mr M had been excluded from this change.

10. HMRC wrote to Mr M on 24 July 2019 to say it should not have removed his SP from his code in 2011. The letter explained that Mr M had previously been in receipt of non-taxable IB, which is usually paid until a claimant reaches 65. The letter explained that as an exception was applicable in Mr M’s case, he had received non-taxable IB for longer. His IB was then replaced by SP, which is taxable and included in his tax code.

11. Practically speaking, HMRC explained that Mr M had underpaid tax in previous years. However, as this was the result of an HMRC error in not collecting the correct amounts, it would not be taking any steps to collect the underpayments.

12. Mr M provided a response to HMRC’s letter on 30 July 2019. He included evidence which he said demonstrated his situation was still ‘exceptional’ and therefore his SP should be excluded from his tax code. HMRC replied on 26 August 2019 and reiterated that the contents of the 24 July 2019 letter were correct, and no further changes would be made.

13. HMRC went on to explain that it had received information about Mr M’s SP from the Department of Work and Pensions (DWP) which it had used when considering his tax code. HMRC recommended that, if he wanted to dispute the decision, Mr M contact DWP directly to ask it for a written confirmation that he did not receive taxable SP.

14. The records show Mr M contacted HMRC several times after the August 2019 letter and continued to dispute the taxable status of his SP, which HMRC said had been correctly included in his code.

15. Mr M wrote to HMRC on 4 August 2020 to complain about the changes to his SP, and HMRC registered this letter as a Tier 1 complaint (which is the first step of a complaint). Mr M remained unhappy with HMRC’s conclusions.

16. HMRC answered on 3 September 2020 and said it had been advised by DWP that Mr M was in receipt of taxable SP. As before, HMRC said that if Mr M had concerns about this or believed this to be incorrect, he would need to contact DWP to ask it for evidence and to stop sending SP information to HMRC.

17. Mr M called HMRC on 11 September 2020 and discussed his case with a different complaint handler. The call was not recorded, but HMRC did write to him on 16 November 2020. That letter included references to the conversation and an apology for the delay in responding to him. It said HMRC no longer had a copy of the July 2011 letter. The call handler explained that HMRC included Mr M’s SP in his tax code because DWP had told it that this was a taxable benefit.

18. The call handler said if DWP provided evidence that Mr M’s SP was not taxable, they would take steps to remove it from the tax code. The call handler said they had contacted DWP on Mr M’s behalf to ask it for evidence, but they had not had a response. The call handler said they were unable to make any changes to the tax code until DWP provided evidence.

19. Mr M wrote to HMRC on 19 January 2021 to say he believed that the commitment of 20 July 2011, that his IB would not be taxable and would not be included in his tax code, should be honoured as there had been no changes to his personal circumstances since July 2011. This letter was added to his complaint and registered as his Tier 2 complaint (the second and final stage of a complaint). Mr M wrote to HMRC again on 20 March 2021 and 3 May 2021 with similar concerns.

20. HMRC provided its response on 22 June 2021 and apologised for the delay. HMRC reiterated that Mr M’s SP was included in his tax code, which HMRC said was correct. HMRC apologised for previously removing Mr M’s SP from his tax code and for giving him inaccurate information during previous contact. HMRC offered a £100 payment in recognition of the incorrect information Mr M had previously been given.

21. Mr M wrote to HMRC again on 3 July 2021, 12 August 2021 and 4 October 2021 to reiterate that he disagreed with the decision the Tier 2 case handler had reached. HMRC issued its final response on 4 November 2021. This letter repeated the position stated in the July 2019 letter and said HMRC would not be providing any further responses to Mr M on this matter as he had completed HMRC’s complaints process.

22. Mr M was referred to the Adjudicator’s Office (AO) as the next stage of the complaints process if he remained unhappy. Mr M complained to the AO on 27 January 2022, and it provided him with its response on 11 March 2022. Mr M referred his complaint to his Member of Parliament on 5 May 2022 and brought his complaint to us on 31 May 2022.

26. The records show Mr M wrote to HMRC on 20 February 2020 to ask for information about the original decision and more information on HMRC’s 2019 decision to overturn it. HMRC responded on 25 March 2020 to explain about his non-taxable IB and that it ended when Mr M turned 70.

27. As explained above, HMRC had received data from DWP about Mr M’s SP. DWP advised HMRC that Mr M was in receipt of his SP, which is taxable, so this had been reflected in his tax code. In updating his tax record upon receipt of information from DWP, namely that Mr M had undergone a change in circumstances which affected his tax liability, HMRC was acting in line with its Employment Income Manual, section EIM75200, which sets out that UK pensions are taxable.

28. It is also in line with its Charter, which sets out that HMRC will ‘work within the law to make sure everyone pays the right amount of tax and gets their benefits and other entitlements’.

29. HMRC said that if Mr M disagreed with this, he would need to provide supporting evidence from DWP which stated that the information given to HMRC was incorrect. This shows that HMRC acted fairly in giving Mr M an opportunity to provide evidence which could result in a different decision. This is in line with our Principles of Good Complaint Handling, which say bodies should ‘Listen to and consider the complainant’s views’.

30. Mr M was not able to provide further supporting evidence and reiterated that he was unhappy that his IB award had been made ‘for life’. We understand that any change would have been an unpleasant shock for him, and we should explain that any awards or decisions about tax status are always dependent on any changes in circumstances.

31. Mr M replied on 18 April 2020 to say he was unhappy with HMRC’s decision, that HMRC had ‘wiped’ his records and this was why it had not provided the information he requested. Mr M said he would give HMRC another opportunity to provide the information before he escalated his concerns.

32. HMRC replied on 30 April 2020 and reiterated that the decision it had reached was a result of the information it had been given by DWP. The main issue for Mr M is that the information given in the 2 July 2011 letter only applied if he was not in receipt of an SP. DWP informed HMRC that Mr M was in receipt of an SP, which he does not dispute, and therefore his IB was taxable.

33. Issues relating to taxation, and specifically the amount of tax an individual should pay, are not matters that HMRC, the AO complaints process or we can address or alter. This is because matters related to levels of taxation should be addressed by the courts and fall outside our remit. The HMRC website at GOV.UK provides more information on how to appeal a tax decision and explains the process in more detail.

34. This is important because the AO was unable to offer an opinion or view on Mr M’s IB and whether it is taxable or not. The AO could not ask HMRC to change its decision on Mr M’s tax status. As it is outside its remit, the AO did not consider the matter further. It also means that although we can give a view as to whether HMRC acted in line with the relevant standards (we can consider a complaint about a fault) we cannot give a view on the legal status of Mr M’s tax affairs and what is or is not legally due.

35. As explained above, unless Mr M can show evidence that allows HMRC to review the matter, in line with its policies and processes, it cannot take action to change Mr M’s tax code. If he continues to dispute that this tax is legally due, this is an appealable matter, which he will need to take to a tribunal.

36. Looking at the history of the case, we can see that HMRC has asked Mr M for supporting evidence from DWP. HMRC explained that any such evidence would need to support his complaint that the information it received from DWP was incorrect and that a failing had happened. To date, Mr M has not provided HMRC with any evidence from DWP to support his complaint.

37. We appreciate that Mr M is unhappy with the changes to the tax code and feels he has been treated unfairly. Having considered the relevant HMRC policies and standards, we cannot see any signs of failings by HMRC. HMRC has explained, on several occasions, why it sent the letter of July 2019 and asked Mr M for information which could lead to the changes he seeks.

38. In its handling of the complaint, HMRC acted in line with our Principles of Good Administration by acting ‘fairly and proportionately’. In giving Mr M the opportunity to obtain additional evidence, which HMRC says it would then go on to consider, it is clear HMRC acted in line with our Principles in its handling of this part of the complaint. Therefore, we are satisfied HMRC has provided an appropriate response. As there is no sign of fault, we will take no further action.

39. Mr M also complains that when he approached HMRC after the July 2019 letter was issued, it was unable to provide him with the records he requested. In his complaint form to us, he indicated that he believes copies of the July 2011 letter have been ‘conveniently destroyed’.

40. HMRC’s Record Management and Retention and Disposal policy outlines its approach to document management. Customer records are usually kept for the current tax year, plus the six tax years prior. Records that are older than this are securely destroyed by HMRC. Simply put, documents must be kept for seven years but are destroyed after that time.

41. The decision letter Mr M refers to was issued in July 2011, and the letter he disputes was issued in July 2019, which is eight years later. This means that in line with the retention policy referenced above, the documents should have been securely destroyed in 2018. Therefore, by the time HMRC wrote to Mr M in July 2019, it was already one year outside the retention policy, so there are no signs of fault in HMRC not retaining the July 2011 letter.

42. We appreciate it is frustrating for Mr M that the documents he wishes to review are no longer available. Having considered the above policy, we take the view that this is not a failing by HMRC. The documents were destroyed in line with HMRC’s document retention policy. Public bodies are usually required to have such a policy under the Data Protection Act 2018 and in line with the ‘right to be forgotten’ section of the UK General Data Protection Regulation. As we cannot see any signs of failings by HMRC, we will take no further action.

1. We have carefully considered Mr M’s complaint about HM Revenue and Customs (HMRC). Having looked at the evidence available to us, and the relevant standards and guidance, we have decided not to take any further action. This is because we cannot see any signs of failings by HMRC.

2. We appreciate Mr M feels strongly that HMRC has gone back on its previous assurance and feels very upset by its decision. We would like to reassure Mr M that in reaching our view, we have thought carefully about the concerns he has raised and everything he told us.

3. We hope this statement clearly sets out why we have reached our decision to take no further action. We provide more information below.