An intermediary has been forced to pay extra compensation despite their client accepting an earlier offer as a “full and final settlement”.
A client, referred to as Mrs W, first complained about advice from Bigmore Associates Limited in relation to the partial surrender of an investment bond in October 2013.
Bigmore had instructed the part encashment to be made across all of the bond segments instead of cashing in just some of them in full.
Bigmore accepted it had made an error and offered to pay the tax liability. Mrs W accepted the offer and a payment was made.
But in March 2014, Mrs W found out the encashment had led to a further income tax charge.
Her accountant calculated £5,473 plus interest was still due to be paid to HM Revenue & Customs because of Bigmore’s error.
Bigmore acknowledged this on 31 March 2014, and told Mrs W any additional tax due would come under the same claim.
The intermediary said it had sent this claim to its insurer and would let her know as soon as the payment was made. But by October 2014, Mrs W had contacted Bigmore again as it still hadn’t paid the extra amount.
Bigmore then informed Mrs W its insurer wasn’t prepared to pay the additional amount because the earlier sum had been accepted “in full and final settlement”, as Mrs W signed a form accepting it as such in November 2013.
Ombudsman Louise Bardell ruled Bigmore should pay Mrs W the additional tax due, plus the interest HMRC has charged since it was due.
Ms Bardell said: “I’m satisfied that Mrs W didn’t realise that signing meant Bigmore would refuse to pay anything further arising from the encashment, if it arose.
“Indeed, it’s clear that Bigmore’s adviser didn’t realise this either, since he initially indicated Bigmore would pay the amount.
“In the circumstances, my conclusion is that it wouldn’t be fair and reasonable for Bigmore to avoid paying the additional amount. I find it should pay the full amount caused by its error, including any interest charged on it.”
On top of paying the HMRC bill, plus interest, Bigmore will also have to pay Mrs W £150 for the worry and inconvenience it has caused her.
