Is it possible to sue HMRC?

[OnYourBikeGB]

I've had a read of this.

Basically, a guy applied for a CIS tax exemption certificate for his one man company. The HMRC guy told him that they needed accounts (incorrectly) and forgot to get the forms signed (contrary to HMRC policy). To compound this, junior staff put an incorrect UTR on some form and also changed the application from one type of exemption certificate to another. All this led to a delay that resulted in the company going bust as it could not get work without a certificate.

He brought a case that the legislation in question established a public duty of care or failing that a private law duty of care arose.

The Court of Appeal rejected any notion that performance of a statutory duty established any public duty or care. Consequently for nearly all the grounds above there was no case.

In these circumstances however the judge found that an unnamed HMRC employee had taken upon themselves to complete the application form (and forge a signature probably) and that in doing so had acted on behalf of HMRC. This created a "vicarious liability" upon HMRC that allowed a private law duty of care to be established.

So in short, the guy had a claim ONLY because an HMRC employee acted outside their remit.

Where the situation is that HMRC is claiming that a scheme is ineffective (NOT illegal) and is making enquiries that a Judge would regard as reasonable in terms of scope and time, it's clear from this judgement that there is no claim.

I think a better line of argument might be legitimate expectation.

Proving that HMRC is acting unreasonably in terms of time taken is a high hurdle.

Interesting. From a S58 point of view, where we were threatened with a fraud investigation, if it was proven that there was no foundation for that accusation to be made, would that amount to a HMRC employee acting outside of their remit if they were to pursue it?

[webberg]

Interesting. From a S58 point of view, where we were threatened with a fraud investigation, if it was proven that there was no foundation for that accusation to be made, would that amount to a HMRC employee acting outside of their remit if they were to pursue it?

Possibly but it might be argued that the HMRC was acting WITHIN his remit in preventing loss to the Exchequer (although technically HMRC's job is to administer the tax system not maximise the tax take).

You would also have to prove a "loss".

Where an unfounded fraud accusation cost you a contract (as it easily could in financial services) then perhaps a case might be found. Where there is no discernible loss, aside from naming a shaming an HMRC employee, what benefit is there?

[centurian]

Interesting. From a S58 point of view, where we were threatened with a fraud investigation, if it was proven that there was no foundation for that accusation to be made, would that amount to a HMRC employee acting outside of their remit if they were to pursue it?

As I understand it, the TAA approach means arguing/admitting that previously declared information on a self-assessment return was not correct (albeit with justifications as to why).

But I think that admission gives HMRC the foundation to consider the possibility of fraud - and at least initiate an investigation.

How far they would be allowed to run with that is another matter, but I simply can't fathom how a judge would find against HMRC for starting an investigation after you've admitted giving them incorrect information.

You may suspect they are launching an investigation for reasons of spite, but I think the office junior would be able to write a justification which any judge would accept.

[OnYourBikeGB]

As I understand it, the TAA approach means arguing/admitting that previously declared information on a self-assessment return was not correct (albeit with justifications as to why).

But I think that admission gives HMRC the foundation to consider the possibility of fraud - and at least initiate an investigation.

How far they would be allowed to run with that is another matter, but I simply can't fathom how a judge would find against HMRC for starting an investigation after you've admitted giving them incorrect information.

You may suspect they are launching an investigation for reasons of spite, but I think the office junior would be able to write a justification which any judge would accept.

Well, to make that work, you'd have to interpret 'admission' of being of the variety that implies a guilt, which even HMRC themselves have said is not the case. Their argument was that the scheme didn't work, not that we had ever acted illegally and they've said so under oath. It's subsequent legal precedent on which TAA is founded, there's nothing to 'admit' to, just to 'agree' with. I think you're maybe giving the office junior a bit too much credit, unless he's the fall guy or can explain how we created a rift in the space time continuum, because that's pretty much the only way fraud could have occurred. If they do go down that route, they won't be able to do it more than once or twice before they are made to look ridiculous. Time, pun intended, will tell, I suppose.

[centurian]

In order to make any fraud argument stick, yes, agree with the above.

But we are talking about whether they can even investigate whether fraud might have taken place - and they have considerably more leeway in this respect.

Whatever semantics are used (admit, agree etc.) - it still involves the basic point that previously declared information may not have been totally correct.

I could be wrong, but I just can't see any judge finding against HMRC if they lay that argument out as to why they initiated an investigation.

[webberg]

In order to make any fraud argument stick, yes, agree with the above.

But we are talking about whether they can even investigate whether fraud might have taken place - and they have considerably more leeway in this respect.

Whatever semantics are used (admit, agree etc.) - it still involves the basic point that previously declared information may not have been totally correct.

I could be wrong, but I just can't see any judge finding against HMRC if they lay that argument out as to why they initiated an investigation.

I'd make a couple of observations.

Firstly, to be fraud an action must be DELIBERATE.

Could you honestly say that back in 2005 or whatever you DELIBERATELY choose to show entries on your return that you KNEW were incorrect?

I suspect not. Only now, in the light of better information and knowledge do you understand that an honest error was made and you want to correct it.

Secondly, this is not a good place to discuss this.

The stakes have been raised and now more than ever HMRC will haunt these boards.