Ombudsman condemns Inland Revenue after assessment fiasco

The Inland Revenue has been forced to pay compensation for more than three years of mistakes in computing an individual’s tax liability.

The Ombudsman, William Reid, ordered the Revenue to apologise for its errors and for ignoring the taxpayer’s warnings that it had underestimated his liability. The Revenue was also instructed to pay cash compensation.

The individual, referred to as Mr. B in Reid’s report, filed tax returns for the years 1987/88, 1988/89 and 1989/90, all showing he had received interest which had not been taxed at source.

Mr. B twice told the Revenue it had underestimated his liability by raising tax assessments on the basis that all the interest had been taxed at source.

Then Mr. B appealed against new assessments issued for 1987/88 and 1988/89, arguing the Revenue had miscalculated the sum of tax he had already paid.

When dealing with Mr. B’s appeals, Revenue officials said no further tax was due for 1989. It subsequently realised #4,996.80 was still outstanding and sought, without prior warning, to collect the money.

Reid said the Revenue had ‘performed extremely poorly’ and said the mistake in twice informing him in writing that he owed nothing for 1988/89 was ‘inexcusable’.

Reid also condemned Customs & Excise for attempting to increase a restaurant owner’s repayment of overdue VAT from #1,000 to #2,000 a month without adequate cause.