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Revenue 'duty of care' isn't to all freelancers

An Appeal court ruling that the taxman must payout over a ‘duty of care’ it owed to a self-employed worker is only a narrow basis for other freelancers to claim against HMRC.

Only when taxpayers believe the Revenue has mishandled their affairs like it did with the appellant’s may they try to claim - but even then, bespoke legal advice is advised.

The appellant, Neil Martin, applied to HMRC for a certificate under the Construction Industry Scheme (CIS) but an official wrongly treated it as a request for a CIS card.

This saw the tax office employee fill out the necessary paperwork for the card on Mr Martin’s behalf, without his permission and despite his request actually being for a certificate.

It took several months before he was given the certificate, during which time he was unable to receive gross payments and therefore unable to pay some of his creditors.

Mr Martin was forced to lay off numerous staff and eventually went out of business. Although initially rejected, the Court of Appeal last month upheld his claim for damages for reasons the judges explained.

They said: “The tax office employee who chose to complete the form as an application for a registration card, without the authority of [Mr Martin]… did not merely make an administrative mistake but assumed an authority to make an application that had not been made.

“In assuming that authority, the employee assumed a responsibility to… [Mr Martin’s company] and it was accordingly fair, just and reasonable to impose a duty of care for breach of which the commissioners could be liable.”

The Professional Contractors Group, which is campaigning to establish that HM Revenue & Customs (HMRC) has a duty of care to all freelance contractors, not just to Mr Martin, has welcomed the outcome.

“It has never before been found that a member of HMRC's staff owes a duty of care to a taxpayer,” said John Kell, the group’s policy officer.

“However, it has not been found that a duty of care exists more generally: this particular member of staff was found to owe a duty be virtue of having completed - incorrectly - a form on Mr Martin's behalf without his knowledge or permission, so the circumstances were unusual.”

In a message to freelancers, group chief executive John Brazier added: “It seems to the PCG unlikely that many, if any, other taxpayers will be able to obtain redress from HMRC as a result of this ruling”.

Roger Sinclair, a legal consultant at Egos Ltd, sympathised with Mr Martin’s pursuit of HMRC.

He told FreelanceUK: “What happened here was that Mr Martin made an application to the HMRC office for one thing - they took it on themselves to change that application to one for something completely different - Mr Martin suffered loss as a result - and he, some might feel understandably, asked HMRC to make good those losses.

“Whilst it's a good thing that he came out on top, it's sad that he had to take it all the way to the Court of Appeal to establish the point that HMRC had actually owed him a duty of care, and that they had been in breach of that duty.”

Responding to questions, Mr Brazier said: “The Court found that HMRC does not, as a rule, owe a duty of care to taxpayers.”

“The particular circumstances of Neil Martin's case meant that HMRC had acted in such a way as to create a duty of care - by filling in a form on his behalf and without his permission.

“Taxpayers who find that HMRC have acted on their behalf in a similar way may be able to seek damages, but only in those particular circumstances… Anyone wishing to bring a case against HMRC following this judgment should seek bespoke legal advice.”

Nov 19, 2007
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