Claiming compensation from HMRC for its mistakes

Q: How do you make the claim?

Give HMRC the chance to fix it first. CHG407 says a contact about redress should only become a formal complaint if it could not be resolved at the first point of contact or HMRC had already been given a chance to put things right. HMRC says this helps it defend claims from people who bypassed that step. Identify the mistake and its dates. CRG5100 says it is premature to consider payment before the mistake or delay, and its extent, have been established. Pay the bill, then claim. HMRC normally wants receipts or paid invoices. Under CRG5275 it does not usually pay agents direct, except in limited cases such as clear evidence of continuing extreme hardship or one mistake affecting most of an agent's clients. Itemise the invoice. If the invoice does not separate normal work from the extra work caused by HMRC, HMRC can ask for more detail, and CRG5100 says it will refuse to pay the agent's charge for providing that breakdown. Raise any distress early. If the problem caused real worry, say so at the start of the complaint. HMRC should sometimes act first. CRG5075 tells staff to invite a claim where it is obvious that costs have been incurred, and to consider doing so where the complainant seems confused or vulnerable. If an agent worries that a client will blame them for the extra bill, CRG5250 says HMRC can offer a letter confirming the mistake was HMRC's.

Q: How might a claim look?

Illustration only. A company's enquiry opens in January 2024. By June 2024 the agent has sent bank statements proving the disputed receipts were loans. HMRC asks again for the same information twice and does not reply to two letters for five months, then closes the enquiry in May 2025 with no adjustment. The director's claim sets out a dated timeline, argues the enquiry should have closed by July 2024, and encloses a paid invoice splitting £1,800 of fees for work after July 2024 from earlier work. HMRC accepts unreasonable delay from July 2024 and reimburses the £1,800, net of VAT because the company recovers input tax. It does not pay for the earlier work, because opening the enquiry was reasonable.

HMRC pays compensation, which it calls redress, when it has made a mistake or caused unreasonable delay and you have incurred reasonable, proportionate costs as a direct result, such as extra accountancy fees. The payments are ex gratia, so there is no legal entitlement, and HMRC expects a claim to be backed by paid invoices that separate the extra work from normal compliance costs. Individuals can also receive a modest payment for worry and distress.

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This page concentrates on what HMRC treats as a mistake and how to put a claim together. For the complaint tiers and the full list of payment types, see complaining about HMRC and the Adjudicator.

What does HMRC count as a mistake?

HMRC’s Complaints and Remedy Guidance (CRG) sets the test at CRG3025. Public bodies must comply with the law and follow their own policy and procedural guidance, so if HMRC falls short of that it has probably made a mistake. HMRC says this includes failing to follow its own technical and operational guidance, unreasonable delay, inappropriate behaviour, poor complaint handling and failing to meet the commitments in the HMRC Charter.

CRG3025 also lists things HMRC does not regard as its mistake, such as processing errors where the taxpayer’s entries were unclear, records no longer held because they were destroyed under its retention policy, and payments allocated wrongly because the payslip was not completed accurately.

When is a delay bad enough to claim for?

Not every delay counts. CRG4025 says HMRC only treats a delay as a mistake when it accepts the delay was unreasonable, and the normal time its processes take is not unreasonable delay. It also points out that some delays already have a statutory remedy, such as statutory interest and repayment supplement, and those rules apply first.

The checklist at CRG4050 is the best guide to how a claim will be judged. HMRC looks at when the problem was first raised and when it was resolved, how complex the work was, whether there were periods of inactivity or poor communication, and whether it kept the taxpayer informed. It also looks at the taxpayer’s side: whether all the facts were given and kept up to date. Missing a published service standard does not automatically mean the delay was unreasonable. A claim that sets out a dated timeline, showing gaps when nothing happened, is far stronger than a general complaint about slowness.

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Can you recover the cost of an HMRC enquiry?

Usually not the whole cost. CRG3075 says the general policy is that the taxpayer bears the normal costs of enquiries that were reasonable to make and were pursued properly, even where HMRC eventually accepts the figures. But redress is possible where the enquiry was handled badly.

Prolonged enquiries. CRG3100 says the longer HMRC persists with its own figures after a mistake in its assumptions is pointed out, the more likely a complaint is justified, and HMRC would consider reimbursing the costs incurred beyond the point at which the case should have settled. One example given is an enquiry the Adjudicator found could have been closed 18 months earlier; HMRC reimbursed the costs of those last 18 months.
Costs before an appeal. A tribunal costs award only covers costs from the decision under appeal. CRG5500 says HMRC can consider earlier costs where the tribunal found for the taxpayer or the dispute settled in the taxpayer’s favour before formal proceedings, but only where HMRC’s view of the law was manifestly flawed or wholly unreasonable, or it persisted unreasonably before conceding. A respectable difference of opinion is not a mistake.
No top ups. CRG5475 says that if a tribunal awards, or HMRC’s lawyers agree, less than the costs actually incurred, the redress policy does not allow HMRC to pay the balance. See tribunal costs in tax appeals.

Watch for double counting with tax relief. CRG5425 notes that a trader can sometimes deduct accountancy costs of an enquiry that resulted in no additional profits, or additions for one year only without negligence, and HMRC will reduce any reimbursement by tax relief already given.

How do you make the claim?

Give HMRC the chance to fix it first. CHG407 says a contact about redress should only become a formal complaint if it could not be resolved at the first point of contact or HMRC had already been given a chance to put things right. HMRC says this helps it defend claims from people who bypassed that step.
Identify the mistake and its dates. CRG5100 says it is premature to consider payment before the mistake or delay, and its extent, have been established.
Pay the bill, then claim. HMRC normally wants receipts or paid invoices. Under CRG5275 it does not usually pay agents direct, except in limited cases such as clear evidence of continuing extreme hardship or one mistake affecting most of an agent’s clients.
Itemise the invoice. If the invoice does not separate normal work from the extra work caused by HMRC, HMRC can ask for more detail, and CRG5100 says it will refuse to pay the agent’s charge for providing that breakdown.
Raise any distress early. If the problem caused real worry, say so at the start of the complaint.

HMRC should sometimes act first. CRG5075 tells staff to invite a claim where it is obvious that costs have been incurred, and to consider doing so where the complainant seems confused or vulnerable. If an agent worries that a client will blame them for the extra bill, CRG5250 says HMRC can offer a letter confirming the mistake was HMRC’s.

How does HMRC decide how much to pay?

CRG5150 says HMRC reimburses costs caused directly by its mistake as long as they are reasonable and proportionate, and expects people to mitigate. CRG5125 adds that there must be a clear causal link, only actual, evidenced loss counts, HMRC can take account of anything the taxpayer did to contribute to or prolong the problem, and no payment should leave the taxpayer better off than if the mistake had not happened. HMRC does not reimburse costs arising from a change in the interpretation of the law after a policy review or court ruling.

Two practical rules affect the figure:

VAT. Under CRG5400 a VAT registered business that can recover the input tax is reimbursed net of VAT. Flat Rate Scheme users, costs unrelated to the business and taxpayers who are not registered get the gross amount.
Contingent fees. CRG5375 accepts that no win no fee arrangements usually carry a premium, and says that premium alone is not a reason to refuse reimbursement, but HMRC will ask why the arrangement was needed and whether it was agreed before work began.

Worry and distress payments are a token. CRG6075 says they usually range between £25 and £500, with most at the lower end, and CRG6050 says they are made only to individuals, though a director of a one person company is not ruled out.

Is a payment an admission that HMRC was negligent?

No. CRG8000 says redress payments are ex gratia, made at HMRC’s discretion, and do not represent an admission of legal liability. HMRC staff are told not to advise on legal options; anyone wanting to bring proceedings must take independent advice. CRG5100 says redress payments are not taxable, except where HMRC pays an agent direct, when they are the agent’s trading income. Larger claims go higher: CRG7000 tells staff to seek central advice before agreeing costs that may exceed £50,000, or a worry and distress payment above £500.

What if HMRC refuses or offers too little?

Ask for a second tier review, then go to the Adjudicator’s Office, which can normally accept a complaint up to 6 months after HMRC’s second tier response. After that, an MP can refer the complaint to the Parliamentary and Health Service Ombudsman; see taking an HMRC complaint to the Ombudsman.

If the real problem is tax that HMRC failed to collect on time, redress is not the only remedy. CRG5050 explains that an extra statutory concession such as ESC A19 decides whether arrears can be given up, while the redress rules deal with the rest of the complaint. Failing the ESC A19 conditions does not mean HMRC made no mistake. See remission of tax when HMRC delays.

How might a claim look?

Illustration only. A company’s enquiry opens in January 2024. By June 2024 the agent has sent bank statements proving the disputed receipts were loans. HMRC asks again for the same information twice and does not reply to two letters for five months, then closes the enquiry in May 2025 with no adjustment. The director’s claim sets out a dated timeline, argues the enquiry should have closed by July 2024, and encloses a paid invoice splitting £1,800 of fees for work after July 2024 from earlier work. HMRC accepts unreasonable delay from July 2024 and reimburses the £1,800, net of VAT because the company recovers input tax. It does not pay for the earlier work, because opening the enquiry was reasonable.

What mistakes weaken a claim?

Claiming for the whole enquiry instead of the period after HMRC went wrong.
Sending an unpaid invoice, or one that mixes routine and extra work.
Using a complaint to challenge a tax decision that needs an appeal; see complaint or appeal.
Claiming the full VAT inclusive fee when the VAT is recoverable.
Asking for compensation for your own time without evidence of lost earnings.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.