HM Revenue and Customs

3. Mr O disputes a tax underpayment of approximately £3500 which he does not believe he should have to pay. Mr O complains that HMRC failed to properly exercise discretion and write the amount off under a specific regulation (ESC A19).

4. The situation has caused Mr O undue stress. Due to the ever-increasing rising costs in living standards, he is concerned bailiffs would call, his tax code would change (affecting his salary) and he has suffered added stress within his family.

5. Mr O wants the tax underpayment to be written off.

6. In August 2022 made a claim t HMRC for the repayment of tax deducted from a pension. At the time, Mr O said he did not expect to receive any further income during the 2022-23 tax year. HMRC processed Mr O’s claim and sent him a refund of £3,581.06 in August 2022.

7. In September 2022, Mr O started working a new job. He told his new employer that he’d had another source of income during the 2022-23 tax year, but he did not have a P45 to evidence this (A P45 shows a person’s pay, tax paid and tax code for the tax year).

8. In December 2022, following contact from Mr O, HMRC worked out what his tax code should be based on his earnings for the year. However, in error, it failed to take account of the tax refund it had given him in August. This led to his employer giving him a further tax refund through his wages.

9. After the end of the 2022-23 tax year, HMRC reviewed Mr O’s tax liability and realised his earlier error. On 13 August 2023, it contacted Hr O to say he had underpaid tax of £3,761.26 and that he would need to make good this shortfall.

10. Mr O complained to HMRC. He said he had done nothing wrong and that the underpayment was caused by HMRC’s mistake. He referred to guidance (ESC A19) which, he said, showed HMRC could and should write off the underpayment.

11. HMRC did not uphold Mr O’s complaint. Although it accepted it had made a mistake, it said it could only write off tax that is legally due in the limited circumstances outlined in the ESC A19. It said that, unfortunately, Mr O’s circumstances were not covered by this guidance.

12. HMRC accepted its mistake had likely caused Mr O worry and distress and offered him £100 in respect of this. Following, further contact with Mr O, it increased that offer to £250. This was to reflect a telephone call in which HMRC had wrongly advised Mr O it would not seek to recover the debt until HMRC had made a final decision on his complaint (Mr O complained that he had been contacted by a debt recovery agency acting on HMRC’s behalf

13. Mr O then took his complaint to the Adjudicator’s Office, the final stage of HMRC’s complaint process. The Adjudicator’s Office did not uphold the complaint. It said HMRC had limited discretion to write off underpaid tax, but was satisfied HMRC had applied the ESC A19 guidance properly. It also said HMRC had acted reasonably by offering Mr O a financial remedy for the inconvenience caused by its mistakes.

Mr O disputes a tax underpayment of approximately £3500 which he does not believe he should have to pay. Mr O complains that HMRC failed to properly exercise discretion and write the amount off under a specific regulation (ESC A19).

16. 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, although we can see HMRC made mistakes, we are satisfied it has taken reasonable steps to put matters right for Mr O.

17. There is little we can add to what the Adjudicator’s Office has already said. The evidence we have seen shows that HMRC can only write off underpaid tax in specific circumstances. One condition is that HMRC must have failed to tell the customer about the underpayment within 12 months of the end of the tax year in which it happened. This is outlined in the ESC A19 guidance.

18. In Mr O’s case, HMRC told him about the debt for 2022-23 on 13 August 2023. This was within 12 months of the end of the tax year. Therefore, not all the conditions of ESC A19 were met so the tax overpayment could not be written off.

19. We should add that, when HMRC decide whether to apply ESC A19 to give up tax that is legally due, it uses its discretion to do so. We do not have legal powers to override or otherwise change a discretionary decision and can only say whether HMCTS followed and applied the correct guidance in reaching this decision.

20. Having carefully considered this we have found that HMRC did this and also acted within our Principles of Good Administration, getting it right. This Principle explains that organisations should follow their own policy and procedural guidance, when reaching decisions. We are satisfied that HMRC did this in the way it applied the ESC A19 guidance in Mr O’s case.

21. We understand why Mr O was upset about having to repay the money. The evidence shows he did not cause the mistake and acted in good faith. However, HMRC also has a duty to collect tax that is legally due. Under our Principles of Good Administration, public bodies should handle public money carefully and properly. By asking Mr O to repay money he was not entitled to keep, HMRC acted in line with those principles.

22. We recognise how frustrating and concerning these events were for Mr O. The evidence suggests that HMRC also recognised this and agreed to pay him £250 as reflection of the distress its mistakes had caused him. We have looked at this in the light of our severity of injustice scale. This is a tool which helps us consider an appropriate level of financial remedy for complaints such as this one and relies, in part, on other, similar, complaints we have dealt with.

23. Our scale contains six different levels of injustice that a complaint could fall into, which increase in severity. Each level is then linked to a range of the financial amounts we would usually recommend in those circumstances. We do not have standard amounts that we suggest for specific failings as these may impact the person affected differently in different circumstances. We consider the individual facts of a case in deciding what level of financial payment is appropriate to recommend.

24. Level two of our scales relates to cases where when has gone wrong has had a relatively low impact on the person affected and often involves a degree of distress and inconvenience. In these cases, we usually consider that an apology for what went wrong is not enough by itself to put matters right for the person making the complaint.

25. Having carefully considered what happened, we are satisfied that the events outlined here equate to a level two injustice. We are also satisfied that HMRC’s offer of £250 falls into line with the range of payments we would usually recommend for an injustice at this level. For that reason, we will not asked HMRC to do, or offer, anything else.

26. As explained by the AO, this was because HMRC included the wrong previous tax figure when they issued a revised tax code to the company on 23 December 2022. This led to Mr O receiving a tax refund via his wages when in fact this was not due.

27. We recognise this is unlikely the outcome Mr O hoped for. We would like to thank him for asking us to investigate the concerns in his complaint and hope our decision clearly shows how we reached this view.

1. We have carefully considered Mr O’s complaint about HMRC. We have seen no indication that anything went seriously wrong

2. We consider that HMRC were unable to waive a tax underpayment for Mr O as he had not met the conditions under ESC A19. None the less we recognise the considerable confusion and distress this caused Mr O.