HM Revenue and Customs

4. Ms J complains that HMRC provided her with incorrect advice about a pension drawdown when she telephoned its helpline in February 2023.

5. Ms J complains that HMRC will not refund her tax in line with its ADML1300 criteria. Ms J also complains that HMRC has offered her £500 for its mis-advice and she does not think this is an appropriate figure.

6. As a result of the tax being considerably more than she was expecting, Ms J could not afford to buy a freehold on her property. Ms J says this has caused her distress, sleepless nights and frustration.

7. In coming to us, Ms J would like HMRC to refund tax of around £44,000. She would like an increased remedy payment of £5,000.

8. Ms J called HMRC in early February 2023 about drawing down a pension lump sum of £150,000. She advised that her accountant had told her she would pay 40% tax and she wanted to know how much tax she would be able to reclaim from HMRC.

9. The adviser told her that she would pay 40% tax and she would receive a lump sum of around £125,000 to £130,000 and she could claim back about £20,000. This was incorrect advice as Ms J had other income that should have been used to calculate the tax. Ms J had a total income of £170,000 that tax year, so the tax would be 45%.

10. Information available on gov.uk for the tax year 2022-23 details what the tax rates and bands were. Total income up to £37,700 taxed at 20%, from £37,701 to £150,000 would be taxed at 40% and anything over £150,000 at 45%.

11. In March 2023, having drawn down the pension on the back of this conversation, Ms J was taxed over £61,000. As this was more than she was expecting, Ms J was unable to afford to buy the freehold of her property as she had planned to do.

12. Ms J complained to HMRC about its mis-advice. It explained that its adviser did give her incorrect advice about the amount of tax she would pay. It offered to pay her £500 and apologised.

13. It said it had considered whether its advice was binding and considered this against its ADML1300 internal guidance. However, it found she did not meet the criteria for this because she did not give HMRC details of her full income or did not tell the adviser she was seeking fully considered advice and what the advice would be used for.

14. Ms J remained unhappy with this outcome and made a complaint to the Adjudicator’s Office (AO). The AO considered the available evidence and did not uphold her complaint in January 2025. It found that HMRC acted in line with its complaint and remedy guidance and taken action to put things right by offering the £500 payment. It found that HMRC’s decision about ADML1300 was reasonable as she did not provide key information that was relevant.

17. Before we decide if we should conduct a detailed investigation of 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 something has gone wrong.

HMRC’s incorrect advice

18. Ms J contacted HMRC in February 2023. She wanted to know how much tax she would likely pay if she drew down a lump sum pension of £150,000 and how much she could claim back. It is not disputed that the adviser gave her incorrect figures, saying that it would likely be around £20,000. For this, HMRC have apologised and offered to pay Ms J £500.

19. Nor it is disputed that Ms J did not provide ‘all information relevant to the query’ as she did not tell the adviser she also has income from her state pension and from self-employment. This added income means that her full income for the year was over £170,000, not the £150,000 the adviser was basing the tax on.

20. Ms J does not accept HMRC’s offer of £500 for its mistake (which we explore more in the next section). She would like HMRC to utilise its internal guidance at ADML 1300. She told us she feels that HMRC have placed the onus on her to have told HMRC her full income, rather than their advisers asking her the relevant questions.

21. HMRC has explained that it agrees it made a mistake but cannot consider it is bound by its mistake because of the ADML guidance on what to consider when HMRC makes a mistake. HMRC found that the first two conditions have not been met. HMRC manual ADML1300 provides guidance to complaints staff considering this type of complaint. It sets out tests which must all be met for HMRC to give up tax:

• The customer made it plain he or she was seeking fully considered advice and indicated what it would be used for • The customer provided all information relevant to the query • The advice given by HMRC was clear, unambiguous and without qualification • The customer acted in reliance on the advice (i.e. he or she did or refrained from doing something as a direct consequence of the advice) • The customer would suffer detriment if the correct statutory position were applied; (e.g. he would be financially worse off than if the correct advice had been given in the first place) • To apply the correct statutory position would be so unfair as to constitute an abuse of power (see ADML1400).

22. We have listened to the call. We have considered whether the adviser should have requested further information relevant to the query during the call. We have also considered whether Ms J meets the criteria listed above. HMRC did not consider all the criteria because she did not meet the first two.

23. Ms J did not tell the adviser she was going to draw down a lump sum to buy the freehold on her property, and she did not provide her full income. While she said, ‘whatever you tell me is going to have a huge impact on what we do,’ she did not say what that impact would be.

24. We asked HMRC whether the adviser should have asked more questions about income. We asked this because Ms J mentioned in the call her self-assessment tax being due, so we considered whether this should have prompted the adviser to consider Ms J had other income. We also asked HMRC to clarify why it considered she did not meet the first two conditions.

25. HMRC explained to us that Ms J did not state in the call what the exact use of the funds they were thinking of drawing down would be used for and the call appeared to be an information gathering exercise. Ms J said, ‘I know this is just hypothetical.’ It said the call was not a fully realised plan to draw down £150,000. It said Ms J ‘appreciated this was not the final word.’

26. HMRC also explained that when Ms J asked, ‘so how much would we get back from you’ the adviser replied, ‘I am not too certain at the moment, we would need to calculate it when it came in, just because there could be other things.’ HMRC explained Ms J is responsible to say that there was other income as the adviser would not have known the final figures until the end of the tax year.

27. HMRC explained to us that it could be argued that the adviser should have taken all income into consideration when trying to answer a hypothetically posed question. It added, it could be equally argued that Ms J should have presented the adviser with their full potential income for the year from all sources to make an accurate as possible estimate of tax commitments.

28. Having weighed all this up, we consider that HMRC’s position on this is reasonable. After listening to the call, we agree with HMRC that the adviser could have taken all income into account, and equally Ms J could have provided the adviser with all the necessary information to enable them to have fully answered the question.

29. We consider that even if we thought HMRC were incorrect to say Ms J did not meet the first two conditions, if it had gone on to consider the third condition, we doubt Ms J would have met this condition either. This condition is, ‘the advice given by HMRC was clear, unambiguous and without qualification.’ This is because the adviser said, ‘I am not too certain at the moment, we would need to calculate it when it came in, just because there could be other things.’ This means the advice cannot be considered as ‘without qualification’ because the adviser stated ‘other things’ could change it.

30. We appreciate Ms J feels as though HMRC and the AO placed too much emphasis on her saying it was a hypothetical call and that she should have checked on gov.uk. She concedes herself that maybe she should have done. We also see HMRC said the calculation could change once everything was considered.

31. We acknowledge Ms J was shocked to see how much of her pension drawdown had been taxed by, and that the refund on the tax she paid was not what she had been led to believe. We know that this has been a great source of upset and distress to her. From what we have seen, we consider HMRC correct to say Ms J’s complaint did not meet the full conditions outlined in ADML 1300. Therefore, we will not consider it further.

HMRC’s offer of £500

32. HMRC accepted and apologised for its adviser giving her incorrect information about how much of a tax refund she would get back if she drew down her pension in a lump sum. It said it would pay her £500. Ms J does not consider this is enough. She thinks it should pay her £5,000.

33. We have considered whether that award is appropriate in line with HMRC’s complaints and remedy guidance.

34. The guidance says HMRC should consider the individual experience of the customer who was affected and the impact its mistake had. Payments for worry and distress are meant to be a token of acknowledging how its mistake has impacted someone and are not akin to damages. Payments range from £25 to £500 but are usually at the lower end of the scale.

35. HMRC offered £500 which is at the higher end of the scale and in line with its guidance. We consider this shows that HMRC took its mistake seriously and recognised the impact it had on Ms J. We are also mindful that this reflects the distress and uncertainty caused and is not to put right any financial decisions Ms J made. This is because we cannot say with any degree of certainty whether Ms J would have made a different decision if more information had been given in the call.

36. Our Principles for Remedy sets out what we would expect organisations like HMRC to offer when it has identified maladministration or poor service. These say where maladministration or poor service has led to injustice or hardship, public bodies should try to offer a remedy that returns the complainant to the position they would have been in otherwise. If that is not possible, the remedy should compensate them appropriately.

37. There are no automatic or routine remedies for injustice or hardship resulting from maladministration or poor service. Remedies may be financial or non-financial. An appropriate range of remedies will include: • an apology, explanation, and acknowledgement of responsibility • remedial action, which may include reviewing or changing a decision on the service given to an individual complainant; revising published material; revising procedures to prevent the same thing happening again; training or supervising staff; or any combination of these • financial compensation for direct or indirect financial loss, loss of opportunity, inconvenience, distress, or any combination of these.

38. We consider HMRC acted in line with its own complaints and remedy guidance and our guidance on financial remedy.

39. We know our findings will be disappointing for Ms J. We do appreciate the seriousness of HMRC’s mistake and the impact it has had on her financially and how upset she has been at not being able to purchase the freehold. While not wishing to diminish this, we do not find that HMRC are bound by the advice it gave her during the call. We sincerely hope Ms J can move forward.

1. We have carefully considered Ms J’s complaint about HMRC. We are sorry to hear about Ms J’s experience in relation to HMRC’s communication about a pension drawdown. We can through speaking with her just how distressing these events have been. We appreciate it must have been a shock when the tax she paid was higher and the tax refund was lower than she was expecting.

2. We have considered the evidence available and can see that HMRC gave her an incorrect figure over the phone. We can see that HMRC has recognised this and its impact. It offered to pay her £500 and apologised. We consider this is appropriate action to put right the impact caused by the mistake so will not take further action.

3. In relation to whether HMRC’s incorrect advice means it should refund the tax, we find that HMRC appropriately considered its ADML1300 guidance when seeing whether its advice was binding. We are satisfied with its explanation for why Ms J did not meet these criteria. We will therefore not take further action. We recognise this will be disappointing for Ms J and explain in more detail below how we reached our decision.