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Test case : Inland Revenue incompetence cannot be questioned in court
10-21-2011, 08:21 PM
Post: #1
Test case : Inland Revenue incompetence cannot be questioned in court

A High Court Judge delivered his judgment in the first ever case where a tax payer has sued the tax authorities for negligence & administrative incompetence. The Judge found that despite the serious errors made by the Inland Revenue the Courts should not have the power to intervene.

Nicholas Bowen represented Neil Martin, a small time builder based in Cumbria, who alleged that Revenue incompetence and bad advice drove his company out of business. To prevent tax fraud in the industry it is a legal requirement for any sub contractor (big or small) to have a CIS Certificate or Card in order to be paid by employers. Mr Martin's case was that numerous errors and delay in providing him with the correct documentation led to financial losses of up to £500,000.

The effect of this judgment is that no matter how bad the negligence and maladministration any similar case brought against the Inland Revenue will almost certainly fail as a matter of principle. Recognising the importance of the point, the Judge gave permission to appeal. He also accepted that had there been a legal duty he would have found the Revenue to be in breach and liable to pay damages. He therefore made no order for costs. In effect Mr Martin won on the facts but lost on the law.

Public authorities & official regulations reach into every aspect of people's lives. When mistakes are made the law invariably allows someone who has been injured or who has lost money to go to Court to argue his case on the merits. Almost no area is immune, save now the Revenue. Even where the tax authorities make a real mistake, deny it and then fail to compensate, the law now appears to be that the Revenue owe no duty of care in negligence and any effective remedy is therefore denied.

The tax authorities accepted that they were guilty of "persistent error". It also transpired during the trial that the Revenue Officer in charge of Mr Martin's affairs was not properly qualified. Despite this, the result is that the Revenue are different to other public authorities that can be sued when things go wrong (such as the police, medical, planning, education and social services, Home Office, highways and banking authorities).

The Judge found that the effect of the legislation relating to the tax authorities meant that he could not impose a duty of care. Yet he did not find that the main function of the Revenue, to increase the overall tax "take" from the citizen for the government to distribute for the public good, would in any way be compromised. He rejected the Revenue's argument that there would be a flood of claims or that defending them would be too expensive, but he did agree that Parliament had never intended the tax payer to have a legal remedy. The judge accepted Mr Martin's argument that the Revenue had been guilty of unreasonable delay, had given bad advice and that their administration had failed in several other respects.

The Revenue's in-house compensation scheme has offered Mr Martin nothing.
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10-21-2011, 08:23 PM
Post: #2
RE: Test case : Inland Revenue incompetence cannot be questioned in court



Last week a High Court Judge ruled in a test case that Cumbrian Builder, Neil Martin had suffered from maladministration and incompetence at the hands of Her Majesty’s Revenue and Customs (The Revenue) in failing to provide him with correct documentation under the Construction Industry Scheme (CIS Scheme). Without a Certificate his company’s cash flow was massively disrupted. Despite findings that, the Revenue had delayed for 52 days and given him bad advice, he found that it owed no duty of care in negligence and were effectively immune from legal action.

Neil Martin was not entitled to one penny to compensate him for the Revenue’s blunders which had caused financial ruin.

There was one encouraging aspect of the litigation, the Revenue’s promise that these problems has been caused by the change over to new procedures in 1999 and that their new scheme was properly administered and that delays were a thing of the past.

However this seems an empty promise as it has now come to light that the Revenue’s negligence and administrative incompetence – highlighted in the High Court was not an isolated incident but the first chapter in a lengthy saga of administrative incompetence by the Revenue.

Neil Martin has revealed that following the Revenue’s initial incompetence, he was forced to factor all of his companies’ invoices to an outside agency to assist with the serious cash flow problems that the mistakes had caused.

In 2001 the factoring agency was told by the Revenue that they could no longer collect gross payments from Neil Martin Limited as the agency was NOT the holder of a Construction Industry Scheme Certificate (CIS certificate).

The agency called in their account with Neil Martin Limited and this business was forced to cease trading. The Martin Group was then established by Neil Martin. When it applied for a CIS certificate in 2002, the Revenue suffered what was later described as “technical problems” and the picture on the CIS certificate was blacked out. This lead to problems with clients who could not make payments, because the identification of Neil Martin could not be referenced to the CIS certificate.

The Revenue then took four months to replace the CIS certificate with a clear one. Against all odds, the business managed to trade until a fresh application had to be made for a new certificate in 2003.

Because of the catalogue of past Revenue disasters, Mr Martin delivered his form to the Revenue in person and obtained a signature from a member of the Revenue staff confirming receipt of his application. Not surprisingly, given the past history, this application form was lost by the Revenue within their own internal postal system and Neil Martin was forced to submit a further three application forms, each of which were also lost by the Revenue.

When it was almost too late these forms came to light and CIS certificates were then processed. On this occasion the time delay from submitting the first application form until the receipt of the CIS certificate was not 52 days, but a staggering 76 days from start to finish.

The impact on cash flow was more catastrophic than he described to the High Court for the 1999 errors. New contracts could not be awarded because of the absence of a CIS certificate. The business could not survive this and it was closed with losses of over £250,000.00.

An inquiry was set up by the Revenue in 2004. Neil Martin received an “official apology” and he was offered compensation payment of £55.00.

Bizarrely, although consistent with the fact that the Revenue have no duty of care to tax payers, no matter what the consequences of their incompetence may be, Neil Martin was pushed by the Revenue to the edge of bankruptcy for tax he was unable to pay. This, of course, was because his business had been forced to close as a result of the Revenue’s own incompetence, despite the apology and the derisory offer of £55.00 in compensation.

Neil Martin says:-

“I am disappointed but not surprised at the decision of the High Court. I fail to understand why, when it makes errors on the scale it has with me, it should be immune from prosecution. I have no intention of letting this matter rest. I shall be taking this case all the way to the House of Lords because I believe this is a serious point of principle. If the Inland Revenue cause a tax payer to face bankruptcy because of their gross incompetence they must be forced to take responsibility and to be accountable for their mistakes like anyone else. If Doctors working in the Health Service were free from being sued as a result of their incompetence or negligence, the consequences would be quite dramatic and unacceptable. The same rules should apply to the Inland Revenue as apply to every other Public Body. I have been enormously heartened by the tremendous amount of support that I have received so far from all around the country. There is an overwhelming body of public opinion who feel that my campaign for justice must continue and the law which provides the Revenue with immunity must be challenged and changed.”

If further information is required please contact:

Glyn Maddocks
Gabb & Co
Old Bank House
Beaufort Street

Tel: 01873 810629
Fax:01873 810485
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