Supplementary memorandum from HM Revenue
and Customs
Question 13: (Angela Browning): How carefully
have you looked at the software (SA online filing) because that
would have avoided the phone call in the first place? I think
there is an issue there which would avoid a few phone calls on
self-assessment?
We believe this question refers to use of HMRC's
Self Assessment (SA) Online service to file a return rather than
the use of a commercial software package.
We tested our software extensively before launch.
In 2008-09 we held workshops for around 12,000 tax agents where
we gathered their views and suggestions on how we could improve
the online service for Self Assessment and fed these suggestions
into service design and development. We also undertook extensive
usability testing with a wide range of customers during the build
stage of the project.
There were no known IT problems with HMRC's
SA Online service in January 2010 that would have prevented customers
who can file online from filing their returns by the deadline.
However, this case could relate to one of the
known "exclusions" where in certain circumstances customers
are unable to use the Online service to file their 2008-09 returns
and would need to either apply a workaround or file on paper.
For example, a few pages of the SA return used by specific customers
are not available online. Where one of these "exclusions"
applies HMRC accept claims for reasonable excuse from customers
who file on paper after the 31 October deadline for paper returns.
Exclusions can apply to both HMRC and commercial software and
are listed on the HMRC website http://www.hmrc.gov.uk/ebu/2009-exc-indi.pdf.
We publish details of service problems affecting
significant numbers of customers on the HMRC website on the "Service
Issues" page. We also provide detailed guidance for the Online
Service Helpdesk advisers to help them to deal with customer calls
about these known issues.
The vast majority of the SA population successfully
filed their returns online by the 31 January deadline. We received
a record number of 6.4 million, an increase of 11.6% on the previous
year, over 3 million of which were filed within the peak month
of January, an increase of 7.9% on the previous year.
Question 27: (Mr Touhig): What scheme do you
have to compensate people who are taking your advice and your
advice is inaccurate?
Except where specifically provided for by statute,
customers have no legal entitlement to financial redress for mistakes
made by HMRC. Nevertheless, HMRC operates an ex-gratia
policy which offers financial redress in some circumstances. In
devising and operating that policy we follow Cabinet Office guidance
on redress and Treasury guidance on financial accounting.
Where a customer complains that HMRC has made
a mistake (for example, by giving misleading advice), and can
show that they have incurred an actual financial loss as a direct
result of that mistake, we will consider offering redress for
that loss.
In addition, we may also consider making a small
payment where it is clear that our mistake has affected someone
particularly badly. These payments are not akin to damages and
payment does not, in any way, amount to an admission of any legal
liability. They are not open to negotiation, as they are simply
a token acknowledgement of the worry and distress that our mistake
has caused.
Our website explains how to complain (at http://www.hmrc.gov.uk/complaints-appeals/how-to-complain.htm).
The paragraph about "putting things right" mentions
financial redress.
Questions 35-40: (Mr Touhig): Can you tell
us that you do not impose sanctions against people who act upon
inaccurate advice that you give them?
Our website explains about relying on information
or advice given by HMRC (at http://www.hmrc.gov.uk/pdfs/info-hmrc.htm).
The following is an extract from the website:
We aim to provide information and advice that
will give certainty to our customers as to the tax consequences
of their transactions, their obligations or liabilities and entitlements.
Our starting point is therefore that you should be able to rely
on any information or advice we provide. However for information
or advice you have received to be considered binding on HMRC,
when contacting HMRC you must set out all the relevant facts and
draw attention to all the issues. This has been described by the
courts as the need for the applicant to place all his cards face
up on the table. We expect you to interpret this relatively broadly,
for example, by providing information on related transactions
where relevant.
Under our existing powers of "collection
and management" (Section 5 of the Commissioners for Revenue
and Customs Act 2005), the principles of administrative law and
the Courts will ultimately determine if we are bound by advice
we have given. The underlying principle is that HMRC has a duty
to collect the correct amount of tax as required by statute. In
the vast majority of cases advice we give will be correct in law
and therefore binding on HMRC. However there are some circumstances
in which our primary duty to collect tax according to the statute
may mean that we can no longer be bound by advice we have given.
For example, this may occur in the following
circumstances:
— for pre-transaction advice, where the
nature of the transaction changes in a way that has a material
impact on the transaction as a whole;
— where you provided incorrect or incomplete
information when you requested advice from HMRC;
— when a Court or Tribunal judgment changes
the prevailing interpretation of the law on which the advice was
based and your liability to tax for that period has not been finalised,
for example, where you have not yet submitted your return or,
if you have submitted your return, where the opportunity to amend
that return remains. Advice will be based on the prevailing understanding
of the law at the time it is given. Where the Courts change the
prevailing interpretation of the law, subject to the principle
of legitimate expectation, we are required to collect the correct
amount of tax as required by the new interpretation of the law;
and
— when the statutory law relevant to the
transaction for which the advice was given changes. If this change
is retrospective, we will not be bound by any advice we have previously
given. This situation occurs very infrequently. If the new statute
is enacted pre-transaction and is prospective, any earlier advice
relating to the transaction will not be considered to be binding.
HMRC has a duty to collect the correct amount of tax as required
by statute at the time the transaction takes place. It remains
your responsibility to take account of changes in the law.
WHERE HMRC PROVIDES
INCORRECT INFORMATION
OR ADVICE
There may be a small number of cases where we
provide information or advice that is incorrect in law. Where
this happens, we will be bound by such advice provided that it
is clear, unequivocal and explicit and you can demonstrate that:
— you reasonably relied on the advice;
— where appropriate, you made full
disclosure of all the relevant facts; and
— the application of the statute would
result in your financial detriment.
Where this is the case, to apply the statute
may be so unfair that it could amount to an abuse of power. But,
where we have given incorrect information or advice, our primary
duty will always remain to collect the correct amount of tax as
required by the law and therefore there will be some circumstances
where we will not be bound by the advice we have given.
Where we provide you with erroneous advice that
is binding on us and subsequently notify you that it is incorrect,
the established legal position is that you will only be required
to start accounting for tax on the correct basis from the date
of notification. All cases will be subject to any statutory time
limits."
Question 73: (Mr Mitchell): I would like a
note on how it is going to affect my area.
Please find enclosed a copy of the letter sent
by Lesley Strathie to the Committee on 13 January 2010 about effects
on Members' constituencies.[11]
4 March 2010
11 Not printed here. Back
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