Hello,my client has been overpaid WTC severe disability element because ticked the 'higher rate care' box on the form when she only gets LRC. She does not know much about benefit system and has a longterm mental health problem. Says she did not know there were different rates of DLA care. Benefit claim forms ask much more specific DLA questions. I wonder if she can argue that the form is confusing and the notes not helpful enough, in requesting that the overpayment is not recovered? And I am wondering why there was no cross-checking or request for proof, which would have shown the error and prevented the overpayment.
Any comments anyone, please?

I see no harm in your client pursuing the request to reconsider recovery of overpayment process. IR will argue that it was not reasonable for your client to believe she was being paid correct amount because award notices would have stated circumstances, including DLA high rate care. However you just go ahead and argue your client's health etc as you have in posting. You may have to go through all the different levels of the procedure before you get a result, but I think its worth fighting, because as you rightly point out no cross-checking of benefits was carried out and surely IR have a duty of care to claimants?

I have a similar case where I am arguing with the reasonableness test on mental health and comprehension grounds. I'll let you know if I get a positive result.

Andrea

Some of the award letters just say she is disabled, with no mention of HRC! We are taking the tack you suggest, would be interested to hear how you get on too, thanks.

I also have a client who ticked the box on the 2004/2005 form which states Higher Rate Care of DLA, and was wrongly awarded the severe disability element, and also the disability element. There is no provision on the form to state the rate of DLA, other than the higher rate of care, so how do the Inland Revenue verify that they should be paying the disability element in any award? Are there any guidelines to their verification processes?

Inland Revenue do not have a verifying process. They have no need to verify any information they are given by clients because the onus is on the client to provide correct details. The compliance unit is very efficient at investigations and clients are heavily penalised if it is found they have given incorrect information, so it is win-win for the IR. For tax credit purposes the only distinction in DLA awards needed is whether or not it is high rate care - i.e. disability element only or disability element plus severe disability element.

So far as verification is concerned, none is done on a routine basis. The tax credit system was attractive to the treasury, partly because it was argued that it could be delivered at low admin costs. This is why we have the notion of "complete claims", which are only touched by a human when being scanned in, and the rest done by the computer. Automated verification checks and risk assessment are done by software, and problems flagged up to the RIAT team within the HMRC. The RIAT team also deal with informers etc. The enquiries and examinations systems run from this platform. In effect, the system depends on honsety, coupled with verification when the alarm bells ring on a particular case (maybe when there is a particular change of circumstances report etc). Note the wording of s19, which allows random checking.

So far as mental capability is concerned, one has worries about the HMRC will cope with this. Have a look at para 10170 of the HMRC compliance manual, which refers to reasonable excuses for not complying with reporting requirements. No reference to mental health issues. By contrast, the DWP is up for it. See para 84846 of the DMG, which confirms that "mentally incapable" people cannot deprive themselves of capital in notional capital cases - relatively enlightened!

Steve

I too have a very similiar case, but the client was also overpaid the severely disabled child element as the DLA she was receiving was for a child. In my client's case, there are no mental health issues involved, it was just a mistake, which the clients acknowledged when pointed out to them. As well as recovering the overpayment at £866 a month, my clients have been told they have to pay a penalty for that mistake and also interest on the overpayment (which according to the revenue is about £5,500 and according to me is about £1000). They really have made a right b***s up of the calculations...!!

I pointed out to revenue that there was no evidence of 'fraud or neglect' and so a penalty and interest can't apply. They said that they were mystified that my clients obviously don't understand the concept of negligence, and I should explain it to them!

I sent a similiarly stroppy letter in return.

Re your case, keep bashing away at them. I am also using the tact of the complexity of the claim form and the length of the notes. After all, we are dealing with 'normal' people here who do not have any knowledge about the system, etc, etc,.

Good Luck!

Hi Tony,

I completely agree. In your case, I presume they are saying there was an "incorrect" statement regarding the DLA. These are by definition higher echelon sins than simply not replying to letters etc. Have a look at this clip from the manual regarding how they define neglect:

http://www.hmrc.gov.uk/manuals/ccmmanual/CCM10060.htm

As you can see, simply transposing figures is held to be neglect! I think a reasonable tribunal would blow that sort of arrogance out the water. I do hope you are appealing the penalty decision. Needless to say, the HMRC also has complete discretion about whether to impose penalties and interest, and I am sure they will not want to fetter this power...

I hope it works out for your client.

Steve

Thanks for this Steve. I hadn't looked at this previously - I wonder what it is about this page in the guidance that is so sensitive the public can't see it.....?

We can't appeal yet as HMRC refuse (actually I don't think the claimant compliance unit know how) to give a legally challengable decision.

Anyway, there is guidance for claimants in leaflet WTC3 - this is in Vol 4 of the SS legislation books (page 757-766). That guide says:

"penalties may be charged...if...we find deliberate or negligent errors...", and "we hope that few people will deliberately or negligently make errors...", and "we can charge you penalties when you have deliberately made an incorrect statement or you did not take reasonable care in completing the claim form".

To me, all of this adds up to saying that negligence is more than an innocent error. It doesn't matter how much REASONABLE care someone makes, mistakes can easily be made - especialy with something complex. For example, I submitted my own tax calc last year in self-assessment. I must have checked it three times or more, but I still made a mistake and got it wrong (to my detriment as the bill was larger than expected!!). I would certainly not say that I had acted negligently.

Exactly the same wording appears in the guidance manual for incorrect tax returns. I'm sure there must be some caselaw in that area. Does anyone out there have any tax law contacts that can offer some assistance in finding the right caselaw?.

Interestingly, CPAG have changed thier stance. In last years handbook they said negligence does not include any innocent errors. This year, somewhat unhelpfully, it says "the penalty is not applied where you have acted without alleged fault".

Has anyone done any appeals on penalties? What arguments have you used? What line have tribunals taken with "fraud or neglect"? Does anyone have arguments they've yet to test out?

Hi Tony,

The HMRC compliance manual has lots on penalties and interest. It is also the case that there are whole sections where access is denied to the public (so much for transparency). The Revenue must issue a decision notice to issue a penalty (and must themselves get the permission of a tribunal to issue the penalty!). You ask about income tax case law. I do not know any, but would you agree we should probably be trying to steer the Revenue away from using income tax principles? I bet it is not precedent, so far as tax credits are concerned.

Steve

Hi Steve,

My understanding was that the IR can impose penalties under ss.31, 32 or 33 and interest under s.37 so long as they give the proper notice in accordance with schedule 2(1). The decision carries a right of appeal to the tribunal. I don't understand why the Revenue need the permission of the tribunal...?

I agree that tax law probably doesn't stand as precedent, but as the administering body is the same and the wording is virtually identical, it seems reasonable that courts (and hence tribunals) will not want to deviate significantly. There is some commentary in vol 4 of the SS leg (page 209), including an interesting HR approach on the burden of proof, but the caselaw quoted doesn't give much away - one way or the other.

I would hope that tribunals, being that much more experienced in the trials and tribulations of claimants, would take a more relaxed view than Her Majesty's R&C's decision makers. There must be some scope for a 'reasonableness' argument somewhere...?

Hi Tony,

I note all your points, and you mention "reasonbleness". Although not directly relevant, I thought the following clip from the manual might amuse you regarding the test of "reasonableness" for s16 decisions, as well as decision making under s18 (reconcilliation) and s19 (enquiries). The source is...

http://www.hmrc.gov.uk/manuals/ccmmanual/CCM10270.htm

"In the absence of any other legislation the decision must be made to the best judgement of the person making the decision. This does not mean you must be absolutely certain of the situation. You can use some guess-work but this must be honest guess-work. What you cannot do is make a total guess in which all elements of judgement are missing. It is impossible to give guidance on all situations which you might encounter but the following gives an indication of what is and is not acceptable...."

So far as permission needed to go to a tribunal to sanction a penalty is concerned, here is a link to the relevant manual extract...

http://www.hmrc.gov.uk/manuals/ccmmanual/CCM10280.htm

This page from the manual is about whether to issue a penalty warning letter. Some highlights:

"penalties should only be used to secure worthwhile information and not to punish uncooperative claimants"

"you should seek your manager's manager's approval to commencing penalty proceedings"

"The letter should allow the person at least 30 days from the date of the warning letter to supply the outstanding details. If there is no reply by that date the papers will need to be submitted to Cross-Cutting Policy (Stockport Technical Unit) who will prepare the referral to the Unified Appeals Tribunal"

And then from http://www.hmrc.gov.uk/manuals/ccmmanual/CCM10300.htm..

"Penalty proceedings – referral to Unified Appeals Tribunal

The initial penalty for failing to comply with a formal information notice is imposed by the Unified Appeals Tribunal. Although this is not an appeal, the UAT will hear the Inland Revenue's request for a penalty to be imposed and will require a written submission in advance of the hearing. Cross-Cutting Policy (Stockport Technical Unit) will be responsible for preparing the submission and it will be presented by a local presenting officer.

There is no need for you to attempt to prepare the submission to the UAT as Cross-Cutting Policy will do the drafting but your submission should highlight the following:-

a brief history of the examination or enquiry to date

the date on which the informal and formal requests were made for the outstanding information or evidence

whether there has been any response to the requests

why you believe the information is still needed before you can make a decision

name, address and phone number of the presenting officer who will attend the tribunal"

I cannot immediately see the statutory basis for the tribunal application.

Steve