Do accountants complain about HMRC's service enough?
Jennifer Adams considers the work of the Adjudicators Office following the issue of their 40-page annual report last month and asks whether the service is being used effectively.
In HMRC's ideal world where customer service is supposedly an absolute priority, there should be no need for an independent Adjudicators' Office (AO). However, last year 5,802 direct enquiries were made to the AO, with 967 new cases against HMRC being considered.
Of the 1,181 cases reviewed by the AO during the year, 389 complaints against HMRC were upheld either completely or in part. The report states that overall the number of complaints partially or wholly upheld decreased to 39%, and for tax credits the upheld rate was 46.6% (note these percentages take into account those cases that were withdrawn).
When placed alongside the larger figure of total taxpayers (31 million) these statistics fade into insignificance being that apparently 98.5% of complaints are resolved internally through HMRC's 'two-tier' process, never getting as far as the AO's desk.
HMRC sees this percentage as a success for its two-tier process and places great score on this fact. The word 'resolved' in HMRC’s parlance means not getting through to AO or higher rather than being resolved to the taxpayer’s satisfaction.
In the tax year to date, HMRC has dealt with 18,997 complaints. In June alone 5,764 were formalised under Tier 1, 48.3% were not upheld, with only 508 making it through to the Tier 2 stage (HMRC Monthly performance update June 2018).
More likely the reason why the numbers reaching the AO are small is that the process puts people off for little gain (although 1,204 complainants were annoyed enough to stay the course all the way to the AO last year).
As commented by accountsdragon in a recent story on HMRC’s complaints strategy: “Most of my clients with RTI queries/complaints simply give up as it costs more to try and resolve.”
The role of the Adjudicators' Office
The role of the AO is set out in the leaflet 'The role of the Adjudicator', which is to rule on whether HMRC and the Valuation Office Agency (VOA) have handled a complaint “appropriately and given a reasonable decision”.
Their work is restricted as they can only consider and rule on specific types of complaints namely:
- Unreasonable delays
- Poor and misleading advice
- Inappropriate staff behaviour
- The use of discretion
The impact of the Adjudicators' Office
The role of the AO is not just to act as judge and jury. Where the office has had most success is persuading HMRC to reconsider their working in specific areas leading to re-education of HMRC's staff.
When a matter is brought to the attention of HMRC's powers-that-be by the AO, they at least listen. One area quoted in the report where this has resulted in HMRC reviewing their methods is in their interpretation of 'Extra Statutory Concession' (ESC A19) under which many complaints are made.
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This ESC refers to the situation where HMRC delays in using information presented with the result being an underpayment tax. Under this ESC, HMRC is permitted to “use their discretion” to agree to a request not to collect certain liabilities in respect of income tax and capital gains tax if the information had been provided within 12 months after the end of the tax year in which the return was received.
Whether ESC A19 should still be around or updated is the matter for another article, and in fact, in 2012 HMRC commenced consultations on revising the text but nothing has happened despite several years having passed.
However, in dealing with the cases before them the AO became increasingly aware of inconsistencies in HMRC's dealings; so much so that they felt the need to collect evidence of the impact of the “incorrect application of ESC A19,” stating that HMRC's “misinterpretation was undermining their reputation” and recommending that staff be better trained in this area.
The fact that their work persuaded HMRC to take action is success indeed for such a small office, but obviously their impact is limited overall bearing mind that relatively few cases land on their desks. A change of HMRC's procedure can only be highlighted as other, similar, cases are brought before the AO for review. There are various graphs and statistics within the report but it would be useful to know the number of complaints under each type, and not just reporting on the two areas where success has been achieved.
Another area quoted in the report as being an ongoing matter is with reference to the Tax Credit Office, which has not been applying notional entitlement regulations as expected should the guidance had been correctly followed.
Ruling on compensation
Should a case reach the AO, it has powers to award compensation if it deems a claimant has lost out financially or suffered anxiety or distress as a result of HMRC's error or delay. Page 15 of the report states that during the year 2016/17 HMRC paid a total of only £576,562 in redress for wrong and distress, poor complaint handling, costs, and “liability given up” (ie the amount not collected), with only £165 granted for “financial loss”. This is a massive decrease on the £1,351,040 compensation total shown in the previous years' report, with no reasons for the decrease being given.
It would be helpful to taxpayers when deciding whether to take their complaint all the way if the report gave more detailed figures including the highest and lowest amounts awarded, possibly in bands.
Even so, the low amount of compensation now being awarded and the derisory total amount of £22,020 awarded for “worry and distress” is the answer to the question as to whether a complaint should be elevated to AO. Obviously the AO does not believe that such cases cause worry and distress or cost the claimant.
The future for the Adjudicators' Office
The AO is aware of the importance of their role, and particularly of being independent. It also appreciates the need for a quicker turnaround in cases being reviewed.
The report reiterates that its business plan published in November 2016 included making changes to their internal systems to enable a shorter time to process complaints (at the time an average of 40 weeks). That aim is to be applauded considering the fact that the complaint might have taken some months to arrive at the AO. The report states that their current timescale is down to 30 weeks, but in future it would not be unreasonable to assume that the whole complaint process could take more than a year from start to finish.
Among the list of aims listed in the report that may have a greater impact on the workings of HMRC is the introduction of a new six-complaint classification strategy, the intention being to “help identify core issues ... giving a regular report of feedback to both HMRC and VOA on each case resolved”.
The department costs £2,844,394 a year to run with only 60 staff (an increase on 56 in 2016/17). There is clearly a need for an independent AO, not least if their recommendations result in amendment or review of HMRC procedure. However, although the office does get results in getting HMRC processes at least reviewed, it must be difficult to have a large impact with the small number of employees.
The reduction in compensation awarded can only result in fewer cases being elevated. In a few years time, it will not be a surprise if a future report shows that the only cases being elevated to AO are those where claimants want to make a point rather than seek recompense.
Jennifer Adams is Consulting Editor of AccountingWEB and is a professional business author specialising in corporate governance and taxation. She runs her own accounting and consultancy business with offices based in Surrey and Dorset.