Reckless, mean, inept – the tax officials who sank businessman over bill he'd already paid

Edward Fowler, 56, lost his reputation as a successful businessman and his 1 million-a-year recruitment company six years ago after HM Revenue and Customs (HMRC) began court proceedings to have him sequestrated over a 37,000 VAT bill.

His wife, Sheila, also had to buy out his share of the family home to avoid the forced sale of their house in Aberdeen.

But in a scathing report, Ann Abraham, the Parliamentary and Health Service Ombudsman, said the bill had been paid when revenue bosses had Mr Fowler declared bankrupt.

And the revenue agency then embarked on a "self serving and mean spirited" course of action which prevented Mr Fowler from fighting his sequestration.

HMRC lawyers wrote to the Scottish Legal Aid Board, objecting to Mr Fowler's application for legal aid to take his case to the Court of Session. His application was subsequently refused.

Ms Abraham declares: "It appears that HMRC's actions were motivated more by a desire to defend their position than by any recognition of the serious injustice suffered by Mr Fowler.

"HMRC pursued Mr Fowler with a reckless disregard for his rights and the consequences of their actions – consequences Mr Fowler has had to live with for five years.

"Post sequestration, HMRC's actions could legitimately be described as self serving and mean spirited. In their desire to defend their own position, HMRC completely lost sight of the devastating impact that their mistake had had on Mr Fowler.

"They neither apologised to him, nor gave any thought to remedying the situation. That is not the standard of behaviour I would expect to see from a government department."

The report continues: "Any competent check of HMRC's computer system would have identified that the debt had been paid, yet no action appears to have been taken.

"These were very serious failings. It is entirely unacceptable HMRC set the process in train and then, in effect, absented themselves.

"Given the gravity of the situation, the almost total lack of care exhibited by HMRC is indefensible and this fact needs to be recognised by them. It appears that HMRC's actions were motivated more by a desire to defend their position than by any recognition of the serious injustice suffered by Mr Fowler."

Mr Fowler has now been offered 50,000 in compensation by Customs bosses. But he said yesterday: "What I have is only a moral victory. I have been through hell. I lost my reputation. I lost my business and got nothing back.

I feel very bitter about the way I have been treated. I still can't get credit or go to a bank and get a mortgage."

Mr Fowler's case was taken up by his local MP Anne Begg, the Labour MP for Aberdeen South.

She said: "It is clear from the Ombudsman's report that HMRC's handling of Mr Fowler's case amounted to complete maladministration, compounded by an inability on the part of HMRC to admit that they had made a mistake."

North-east Tory MSP Alex Johnstone said: "It is absolutely unacceptable that this should happen. This is not about supporting cheats, it is about somebody being cheated by the system. He should be fully compensated and not only for his monetary loss."

SNP MSP Alex Neil said: "This is outrageous. Heads should roll at HMRC for this.

"Government agencies should be supporting people in business and helping create new businesses, not putting perfectly good firms out of business."

A spokesman for HMRC said the agency would examine the ombudsman's ruling.

However, the ombudsman's report states: "The chairman (of HRMC] told my staff that more effective controls had since been put in place to improve the system of communications when a payment is received.

"The documents that accompanied the chairman's response showed that HMRC had already identified a risk of Scottish contracted solicitors continuing to action cases without being required to seek instruction from HMRC at key stages in the legal process.

"HMRC noted that this was out of line with the more effective controls in place in England and they were taking steps to remedy the situation."

'I even thought about suicide. I've lost everything and I did nothing wrong'

SIX years ago, Edward Fowler thought he finally had it made. The recruitment company he had built from scratch had just broken through the 1 million turnover barrier for the first time. Business was booming.

Allsorts Task Force, the firm he had founded in Aberdeen in 1996, was finally reaping the rewards of the years he had devoted to building up his contacts in the oil service, catering and construction sectors.

But in the space of only nine days, his business was served with a court summons and he was declared bankrupt in his absence over a VAT bill for 37,000 he had already paid.

Mr Fowler's nightmare began after he had problems with the computerised accounting system at his business. He was unable to submit a full VAT return, leading HM Revenue and Customs (HMRC) to issue an assessment and default surcharge, totalling 41,475.

Mr Fowler paid the money due on 25 September, 2002, and sent HMRC another cheque, for 37,727, on 5 November, after being told he still owed the government money. Despite the payments, HMRC's lawyers raised a new action in the courts in respect of a VAT assessment and default surcharge.

According to the damning report issued yesterday by the Parliamentary and Health Service Ombudsman, HMRC was told the debt had been paid, but it took no action to follow up the information provided in a telephone call.

Mr Fowler's world began to fall apart on 31 March, 2003, when a sheriff officer served a sequestration petition at his business premises.

He said yesterday: "I thought I had paid everything I was due and there was nothing to worry about. When the sheriff officer came to my office, I was on holiday, and a young girl of about 16 who was temping for me signed the papers. But she forgot to give them to me when I returned."

Nine days later, completely unaware he was facing sequestration, he was declared bankrupt at a hearing at Aberdeen Sheriff Court

Mr Fowler said: "I had no chance to contest it. I said a mistake had been made, but nobody would take my case on board. Nobody believed me. They said you can't be made bankrupt without knowing about it.

"I didn't get a choice about what was happening. A guy walked in to my office and told me I had been made bankrupt and that he was in charge of my company."

His business was quickly wound up and he was left with nothing. His wife, Sheila, had to buy out his share in the family home so they could keep a roof over their heads.

"If she hadn't done that, the liquidator would have taken the house as well," he said. "I had lost my reputation and my business. My business carried on through another person – an employee – who took it on under another name, and now it's hugely successful."

He went on: "For the next three years, I suffered for depression and stress. There was no point in working because anything I earned they would have taken from me. It had a huge effect on me. After three years, I approached the lady who owns the business now and she gave me a job. She did that because she felt so bad what had happened to me."

Mr Fowler called for the law to be changed to prevent a repeat of what had happened to him. "What happened to me can't be right," he said.

"There needs to be a change in the law. In England, you can walk into the bankruptcy court and ask them to recall your case, but in Scotland you can't. You have to go to the Court of Session, and to do that you have to have an advocate, and to get an advocate you need money."

Mr Fowler added: "The agency has never apologised to me personally since the day it happened. They have never spoken to me at all. They have never taken any calls or answered any letters. I think it's a disgrace for a government department to be able to do the things that they have done.

"I've been told this is one of the most critical reports ever issued by an ombudsman. It's scathing. But that's only right because I've been through hell.

"There were times when I thought suicide would be the best thing for everyone. My name has been blackened, and I've lost everything, when I did nothing wrong. It's disgusting."

He added: "As far as I'm concerned I've only won the first round. When I was asked to quantify what I lost, I put it down as being in the region of 300,000 to 400,000. And that doesn't take into account the massive impact all this has had on my life and my family. I'm going to keep fighting until I get what I'm owed."