9 Apr 2014 04:12pm

Let's fine HMRC for its blunders

As accountants I am sure we all see cases of HMRC just getting things wrong. Perhaps we become a little blasé about this but think for a moment how the taxpayer feels when the brown HMRC envelope drops through the door. Whilst some will take it in their stride, many will be sent into a panic by a letter from HMRC especially one demanding money. The average taxpayer often assumes that HMRC gets everything right and for those paying tax through PAYE, the assumption seems to be that their tax must be right at it is collected each month.

Oh how little they really know about how our archaic, out of date, cumbersome tax system really works.

Recently we have seen a rise in the number of stupid HMRC generated errors though. Let’s take a few examples...

A client’s corporation tax payment of over £20,000 was recently returned for no good reason whatsoever. The client called HMRC to be told that they had logged the payment twice so generating the refund, even though there was actually only one payment made to HMRC. The client kindly agreed that he would destroy the refund cheque if HMRC corrected the logging error. I wonder what would have happened if our honest client hadn’t called HMRC; would they have noticed their stupid error?

Then we had the case of a client who had correctly completed and filed her self-assessment on time and paid the right amount of tax only to receive a very strongly worded letter from HMRC demanding that, like everyone else, she pay her tax on time. She took great offense at the arrogant wording of the letter and rightly so given it was yet another HMRC error. In its wisdom HMRC had added the state pension onto her income figures, even though the lady had waived it, and in doing so had made a correct tax return incorrect. Not only this but a series of aggressive debt chasing actions and letters were triggered by HMRC incorrectly amending the tax return to the figures that they thought were right.

Finally I’ll mention the case of the client who had fully repaid his student loan only to have HMRC tell him he hadn’t. Despite repeatedly telling them they were wrong they would only correct their error after checking with the Student Loans Company. Farcical.

In all cases instead of the HMRC staff member just pressing the button to update the information and setting off a whole host of actions, surely a simple letter checking that the taxpayer had made a mistake before doing the correction would be a better way forward? Doesn’t the taxpayer, or customer as HMRC likes to call them, deserve the right to have the facts checked? Or do they just have to accept the superior arrogance of HMRC in assuming that it is always right? How lovely it would be if that were the case.

Clearly HMRC have the right to fine a taxpayer if they get their tax return wrong. So in a world where we often hear shouts that the tax system must be fair surely that gives rise to the taxpayer or their appointed representative, i.e. their accountant, being allowed to fine HMRC when they get it wrong. How about sending HMRC the following letter (tailor as appropriate) using the same terminology as they apply to taxpayer penalties:


Due to the error which you accept you have made, my accountant and I have wasted a lot of time on this matter. We consider your error to be deliberate and you did not exercise reasonable care when dealing with my tax affairs.

To this end I impose a fine of £100 which is payable immediately.

I look forward to receiving your remittance by return.

Yours faithfully
An honest taxpayer

I’m sure there will be some who think that HMRC should not be fined as it is an inappropriate use of taxpayers’ money. But let’s focus for a moment on how much all of these errors cost the taxpayers; just think what the wasted taxpayers’ money could be spent on.

I, for one, would be encouraging our franchisees to fine HMRC for their blunders and would suggest that if any money is collected from them by way of a fine we could donate it to charity.

HMRC need to sharpen up their act; dumb errors are just not good enough. Tax is taxing; even more taxing when HMRC can’t get the basics right.

Elaine Clark, MD of CheapAccounting.co.uk, was named Woman in Finance by the Network of Aspiring Women in 2011 and has made several appearances on BBC Radio 4’s Money Box




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