500,000 tax refunds delayed…

HMRC, News, Personal Tax,

A recent Freedom of Information request by an accountancy firm to HMRC has shown that more than half a million taxpayers are still waiting for tax refunds from 2019-20. Whilst fraud checks causes some of those delays, the figures show a significant increase over previous years. This number equates to 16% of the repayments owed.

The repayments are generated when a tax bill is lower than expected, for example if income had reduced over the year, and payments on account were made based on the previous tax return. Once the tax return for the year is submitted, the overpayment should be identified and a refund can be claimed. HMRC’s own guidance suggests that recipients should allow four weeks for that tax refund to be received. Our experience is that in many cases this takes substantially longer, and we suggest clients wait six to eight weeks before investing the time in chasing.

The Freedom of Information Request confirms our feeling that tax refunds requested over the last six months in particular are taking far longer to be received.

A partner at the firm who made the request said: ‘More and more taxpayers are experiencing huge delays, often up to a year or more to their repayment claims being processed and the refunds making their way into bank accounts. This causes real distress to taxpayers, many of whom will be understandably concerned about cashflow after a difficult couple of years in Covid-19 trading conditions.’

HMRC’s response was to state that around 90% of self-assessment repayment claims are processed without delay, and their spokesperson added: ‘This is about HMRC taking action on behalf of the vast majority of honest taxpayers to ensure only those entitled to repayments receive them. We are undertaking an increased level of checks to stop criminals abusing our self assessment (SA) repayment systems. A small number of legitimate customers, around 3% of all self assessment repayment cases, may therefore experience a delay in their repayment claim.’

‘We block tens of thousands of fraudulent claims every year and in 2020/21 we prevented more than £1bn in erroneous and fraudulent self assessment claims.

‘We have significantly increased resources to minimise any delays incurred and for cases that are paused while checks are undertaken, we are clearing these cases within target.’

We’ll wait to see if the ‘increased resources’ reduce the lead time for tax refunds over time, but having had several clients who have legitimately claimed a valid refund and have had to wait many months, we’re not convinced!

So, what can you do?

If we act for you and have advised that you’re due a tax refund, please allow six to eight weeks for that to come through once your Return has been submitted.

If the refund is not received by that point, please let us know! We can’t guarantee that our contact will prompt HMRC to release funds, but we’re very happy to try for you. We should at least be able to find out if the refund is caught up in security checks, which may at least offer some estimate of a release date.

If you are not a client, you will need to contact HMRC to chase your refund. You can also log in to your Personal Tax account to check its status.

Do bear in mind that the closer you file your tax return to the filing deadline in January, the busier HMRC will be, so the sheer volume of processing will take longer. This will impact on the rate at which refunds will be generated.

If you know in advance that your income has reduced during the year and that you’re likely to be due a tax refund, our recommendation would always be to get that submitted as quickly as possible and get the funds into your account, rather than HMRCs!

Please get in touch if we can help in any way.

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