HMRC mistakenly forced business into bankruptcy

HM Revenue and Customs has been described as ‘self-serving and mean-spirited’
after being ordered to pay a Scottish businessman £50,000 compensation
for mistakenly forcing his business into bankruptcy and refusing to help
reverse the process.

Edward Fowler is also to receive a formal apology, a letter for circulation

to his creditors admitting the tax authority is to blame for what went
wrong, and a refund for expenses incurred by his wife when she bought out his
share
of the marital home to prevent it being seized by the liquidator.

The payout follows a report from Ombudsman Ann Abraham which found
maladministration by HMRC who had ‘pursued Mr Fowler with reckless disregard

for his rights and the consequences of their action’ and described their
performance as ‘self-serving and mean-spirited’. They went on to ‘unreasonably’

oppose him obtaining legal

Fowler fell into arrears with VAT returns as a result of problems with his

computerised accounting system. He paid a disputed demand in time but HMRC
proceeded with sequestration proceedings (Scottish bankruptcy) regardless.
On being asked to remedy what went wrong HMRC insisted business was bankrupt
anyway because of other outstanding tax and trade
debts.

The Ombudsman commissioned an accountants’ report which suggested Fowler’s

outstanding tax and debts were overstated and could not reach a firm
conclusion over the prospects of his business surviving if the sequestration

had been halted.

Fowler ended up suffering from depression and working for a former member of

his staff who took over the business.