Tax man drives builder to bankruptcy

link

By Rosie Murray-West, Business Correspondent
(Filed: 29/09/2006)

Neil Martin faces bankruptcy and losing his home because of an error by the taxman. He has been told the law can do nothing. The taxman is not liable for his mistakes even when he seriously disadvantages customers, a judge ruled yesterday.

Neil Martin lost his case after being the first person to sue the Inland Revenue over allegations of negligence or administrative incompetence

Andrew Simmonds, QC, said that the Inland Revenue had been responsible for a 52-day "negligent" delay that had helped push a builder to the brink of bankruptcy.

However, he ruled that the tax office is immune to prosecution by individuals and businesses, unlike other public services such as hospitals and police forces. Neil Martin, 38, became the first person to sue the Inland Revenue, now known as Revenue & Customs, for alleged negligence or administrative incompetence.


The builder, from Barrow-in-Furness, Cumbria, said that his business had been plunged into a cash flow crisis after a delay in processing a crucial form.

Without the form, part of 1999 anti-fraud legislation called the Construction Industry Scheme, contractors could not pay their bills without subtracting tax at source, which caused a cash crisis for the company.

Mr Martin now faces personal bankruptcy after being left with a swingeing tax bill of £250,000 along with substantial legal costs.

Yesterday he said that he intended to appeal against the judge's ruling and believes that the case could go "all the way to the House of Lords".

"This absolutely stinks," he said. "Ninety per cent of this judgment went in our favour, and I needed 100 per cent to get compensation. The Revenue is just allowed to put me out of business." He said that he was at risk of losing his home and that the case had been a huge strain on his fiancée, Janet.

The judge ruled that the tax office has no "duty of care" to the individuals it advises, meaning that no individual can prosecute it for incompetence.

However Mr Simmonds acknowledged that the case had raised "some very tricky legal questions" of general public importance and granted Mr Martin permission to challenge his ruling in the Court of Appeal. Nicholas Bowen, barrister for Mr Martin, told the judge after his ruling: "This will, of course, be very welcome news for the Revenue, but a very bitter pill for Mr Martin. The Revenue have established an effective immunity from suit."

Describing the dire impact of the court case and the Revenue's negligent delay on Mr Martin's life, the barrister said: "The end result is that he will lose his home and be bankrupted."

Despite what Mr Bowen called "persistent error and administrative incompetence" by the Revenue, he said Mr Martin left court with "a big fat zero".

Revenue & Customs welcomed the judge's ruling. "It confirms HMRC's understanding of the scope and extent of its duty of care to applicants under the Construction Industry Scheme," a spokesman said.

The Revenue had argued that, had Mr Martin won, it would have opened the floodgates to thousands of claims from businesses and individuals who believed that they had been disadvantaged.

-west@telegraph.co.uk

Information appearing on telegraph.co.uk is the copyright of Telegraph Group Limited and must not be reproduced in any medium without licence.