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Redress or retribution – the new code of practice

Category Technical Articles
AuthorTechnical Department
  • The new code of practice (COP) 1 is shorter and customer friendly and reflects the Inland Revenue's new customer facing, enabling culture and its wider responsibilities in particular for tax credits
  • The old definitions for unreasonable delay and persistent or serious mistakes have gone
  • The Low Income Tax Reform Group (LITRG) consider that the new customer friendly approach is still very daunting for unrepresented taxpayers
  • Does the ‘one size fits all’ approach work?
Article by Richard Mannion, a partner and Head of Tax with Solomon Hare Bristol and a former President of the Chartered Institute of Taxation. Published in the February 2002 issue of Tax Adviser.
The Inland Revenue were the first Government department to have a Code of Practice and COP 1 (mistakes by the Inland Revenue) was issued in 1993. However by 2001 the Revenue had recognised that the original COP1 was no longer appropriate for a customer facing, enabling organisation that was involved in the handing out of tax credits as well as collecting taxes via a self assessment system. In addition the Code of Practice provided the framework within which the Adjudicator had to operate when considering whether to award costs against the Revenue and one can assume that the Adjudicator's Office was keen for that framework to be updated. The decision was made to rewrite COP1 with an extremely challenging publication date for the revised version.

The old COP

The basic problem with the old COP1 was that it was too prescriptive in trying to define the circumstances in which costs might be recovered from the Revenue, namely delays and errors.


Complaints would only be entertained where there had been a ‘qualifying delay.’ That meant that the 15-day target for replying had to have been missed by six months! Clearly that definition was wholly inappropriate for a low-income family whose finances were dependent on tax credits and for whom a delay of just one week might be critical.

In addition to the strict time requirement for a qualifying delay it was also necessary to show that the Revenue had no good reason for the delay.


In order to qualify under this heading an error had to be either serious or persistent. The Redress Handbook defined serious error as ‘something which no responsible person, acting in good faith and with proper care, could reasonably have done.’

A persistent error did not need to be serious and examples were given as follows:

  • the Revenue persisted in a mistake even after it had been pointed out;
  • the same type of mistake was made, e.g. an incorrect assessment issued several times; and
  • many unconnected mistakes were made in a 12 month period.
However in a real life situation where the same tax office made a series of similar errors in respect of eight different individual partners the Revenue took the view that this did not qualify as a persistent error because they had only made one mistake on each case. The complaint ended up with the Adjudicator who had to accept that the Revenue's view was within COP 1.

The change process

As mentioned above the Revenue were working to a very challenging target date for publication of an updated Code of Practice. They embarked on a wide consultation exercise including a workshop with representatives of Working Together. The Revenue made the point very clearly that they were in listening mode and the object of the exercise was to end up with a revised COP 1 which made sense to their customers. On the other hand the Revenue were responsible for running the national taxation system and so it was necessary to work within sensible constraints and parameters, particularly bearing in mind that compensation payments have to come out of the Revenue's own operating budget.

The representatives from both the professional bodies and Revenue were in absolute agreement that no-one wanted to end up with a compensation culture. The professional representatives made the point that in 99 cases out of 100 that go wrong, the agent is not interested in claiming a small amount of compensation because doing so could easily cost more in lost time than the compensation itself. What was paramount was that when things went wrong an agent could phone up and speak to someone who listened and promised to look into the matter, and subsequently did so. Everyone was agreed that in most cases what was wanted was a culture of ‘acknowledge the problem, put it right, say sorry.’

However the point was also made that certain relatively trivial errors can have serious consequences for the agent/client relationship; e.g. the imposition of an incorrect late filing penalty where a tax return had been hand-delivered to a tax office on time, but not properly logged.

There was general agreement that just issuing a new Code of Practice should be only part of the process, and in addition the Revenue needed to do more to improve the quality of processing within the Income Tax Self Assessment system. The timing of the review was fortuitous insofar as it tied in with the move to Area management, which in due course should give local management much better control over the organisation of workloads within their respective Areas, provided they are given the necessary resources.

The new COP

The new COP1 is shorter and more user-friendly than the original . It starts from the premise:

‘when you do have a complaint, we want to put things right for you, learn lessons from where we went wrong, and make sure that we don't make the same mistake again.’

There is the recognition that the Revenue is a huge organisation and things are bound to go wrong from time to time. When things do go wrong the taxpayer is invited to get in touch as quickly as possible – often a 'phone call will be sufficient to get things put right.

Where the matter is not resolved and the taxpayer wishes to take things further there is a three-step complaints procedure:

‘Step One

When you have a complaint, it is usually best to contact the person you have been dealing with. However, if you prefer to contact that person's immediate manager, or the person in charge of the office, we will tell you who to contact.

Step Two

If you cannot settle your complaint at step one, contact the Director with overall responsibility for the office you deal with. The office you have been dealing with will tell you who to contact, and the names and addresses of Directors (as listed). The Director will review your complaint objectively.

Step Three

If you're not happy with the Director's response you can ask the Adjudicator to look into your complaint. The Adjudicator is a fair and unbiased referee whose recommendations are independent…’

Complaints can be made in writing, by ‘phone or fax, or by a visit to the local tax office. The Code of Practice goes on to promise that complaints will be dealt with in a friendly and professional way without bias or discrimination. The Revenue promise to say sorry, explain what went wrong and why, and correct the mistake so that the taxpayer's affairs will be in the same position as if the mistake hadn't been made. This is combined with the stated intention of learning from the experience.

It is interesting to note that for most individual taxpayers the ‘Director’ referred to in Step Two is the Regional Director rather than the Area Director. This is because Revenue were aiming to draw up one leaflet that covered all potential complaint situations and there are a number of tax matters that are not dealt with via area offices, for example tax credits, national insurance contributions, stamp duty etc.

The professional representatives felt that the role of the Customer Service Manager in the area offices would be crucial in this area of redress and suggested that complaints should be signposted to them. However the Revenue took the view that the culture in a customer facing/enabling organisation should be for all members of staff to take responsibility for all aspects of customer service, including dealing with complaints. Redress is an important part of the culture change taking place within the Revenue and all frontline managers will receive training on the subject.

Claiming back costs

The Revenue acknowledge that there will be times where the taxpayer has to pay additional costs because of their mistake or delay. Where this is the case the taxpayer can claim any reasonable costs which they have had to pay as a direct result, e.g. postage, ‘phone calls, travelling expenses, professional fees, financial charges and interest on overpaid tax and National Insurance (NI). However the Revenue may need to see receipts and invoices for the costs involved.

Consolatory payments

The code acknowledges that mistakes and delays may cause the taxpayer a great deal of inconvenience or irritation and goes on:

‘if our actions have affected you particularly badly please let us know. We may be able to pay you an amount of compensation to acknowledge and apologise for the way we have treated you. These payments, which are not intended to put a value on the distress you have suffered, will usually range from £25 to £500.’

Where the complaint itself is handled badly or is subject to an unreasonable delay then an additional payment of compensation may be made in the region of £25– £500.

The main body of the new code then concludes with a list of Frequently Asked Questions. Question 2 will be of interest to tax practitioners:

‘Q: I am an agent. Will you pay compensation directly to me?

A: No, not usually. However, in exceptional circumstances (for example, when our mistake has affected most or all of your clients) we may consider paying compensation direct to agents on behalf of their clients.’

Pluses and minuses

During the consultation the professional representatives took issue with the requirement in the original COP which required a taxpayer to have paid their agent's fees for sorting out a muddle before they could be reimbursed. In many such cases it is just not feasible for the agent to bill his client for the additional time spent in sorting out an error since that would add insult to injury; the professional representatives argued that it should be possible for the agent to charge the Revenue for the actual time spent at normal charge rates in those cases. The Revenue were clearly concerned such a system could be open to abuse, but have promised to continue discussions to see whether it is possible to find an acceptable compromise.

LITRG response

LITRG are concerned that the new COP 1 fails to meet the needs of unrepresented taxpayers. They want to see a less intimidating process where the contact points are clearer and the barriers to complaining are reduced. They have put forward the following recommendations:

  • The procedures should be simplified by having (at stage one) an identified Customer Service Manager responsible for complaints in each office;
  • At stage two, those who wish to take their complaint further should contact a single Complaints Helpline;
  • Clear service standards should be set out so that customers know what to expect;
  • The circumstances in which the Revenue will forgo tax when they have made mistakes should be explicitly stated (ESC), A19.
What next?

The Press Release which accompanied the publication of the revised COP1 made it clear that the Revenue will welcome feedback and if necessary issue an updated version next year. One question already on the agenda is whether it is feasible to have a ‘one size fits all’ approach with one just one COP that applies to everyone. Would it not be more appropriate to have a separate COP for individuals who pay income tax either through pay-as-you-earn (PAYE) or through the self assessment system, and whose affairs are dealt with in Area offices? This might enable the complaints process to be simplified still further for those individuals with a single point-of-contact for complaints in each Area.

Taking this a stage further, perhaps there could be a separate COP designed especially for agents. Your views and comments are welcomed and can be sent via the Working Together Team (e-mail

Technical Department
020 7235 9381

February 2002 by


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