HMRC admits errors in use of Private Debt Collectors

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Well over half the complaints made against the taxman are upheld by HM Revenue & Customs’ own internal complaints system.

Of 58,110 complaints received in the year to the end of March 2011, HMRC found against itself in 57 per cent of cases, while its performance is getting steadily worse, according to internal data. Grievances submitted by individuals and small businesses range from poor treatment by HMRC staff to delays and errors in the tax bill.
‘The number of cases where HMRC has admitted it got something wrong is remarkable,’ said George Gillham, legal director at law firm Pinsent Masons.

‘It suggests that if you make a complaint to HMRC, they’ll probably decide you’re right, at least in part.’ He said many taxpayers are unaware that they can use HMRC’s internal complaints system to reclaim substantial sums, even if their tax bill is correct.

Other reasons to claim money back include mistreatment by HMRC staff and errors which force taxpayers to incur financial costs.

‘Many complaints result in HMRC writing a tax liability off or offering compensation – and quite a lot of money can be at stake,’ said Mr Gillham.

‘HMRC is prone to making errors. It’s unfortunate, but it’s true.’

He blamed budget cuts for reducing the amount of skilled employees on HMRC’s ‘frontline’, as well as the ‘massively increased complexity’ of the tax system in the past fifteen years.

Many of the complaints concern HMRC’s Debt Management Office, which chases taxpayers who deemed to owe money to HMRC. The DMO does not judge whether HMRC is right to claim the money back and some taxpayers have complained that it has pursued innocent people in a ‘heavy-handed’ manner.

‘The DMO aren’t there to negotiate, so even if HMRC has made a mistake, the DMO won’t back off until it has what it’s been asked to retrieve or been informed of a mistake by HMRC,’ said Mr Gillham.

‘It’s a very unpleasant and distressing experience.’ The lawyer said complaints about HMRC were on the increase, partly due to a growing tendency to use private debt collectors as contractors for debt collection.

Even complaints that cannot be resolved internally by HMRC and go instead to an independent adjudicator are increasingly decided in favour of the taxpayer, the figures show.

In 2011-12, HMRC paid £363,954 in compensation and dropped tax demands worth £968,782, meaning it made errors that cost it £1.3m.

By comparison, mistakes cost HMRC just £470,608 in 2005-06, the first year after the Inland Revenue was merged with HM Customs & Excise.

‘For performance to get worse over time is incredibly disappointing,’ said Mr Gillham.

An HMRC spokesman said: ‘HMRC serves millions of people every year, and received just under 75,000 complaints in 2011/12.

‘About 2 per cent of these complaints were investigated by the Adjudicator, indicating that we successfully resolve the vast majority of complaints we receive from customers.

‘HMRC takes complaints very seriously; we want people to be able to tell us when we make mistakes and our service falls short.

‘Complaints not only allow us to put things right for the individual but also tell us where we need to learn lessons and improve our services for all our customers.’

The HMRC spokesman added:’We are making real improvements to our customer services, boosting staff in contact centres by 1000 and turning around post faster than ever. Such improvements will reduce the level of complaints going forward.’

The HMRC spokesman added:’We are making real improvements to our customer services, boosting staff in contact centres by 1000 and turning around post faster than ever. Such improvements will reduce the level of complaints going forward.’

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