Tax Refund Delays to increase?

Many taxpayers have made payment on account over the last year, calculated against profits made previously. As income has dropped for many, they’re now due refunds of their overpayments. Sadly, those refunds are not coming out from HMRC as quickly as we’d like (or expect!) and we’re now starting to hear why!

We all know that HMRC have been hugely over extended during the pandemic.

The Furlough scheme, SEISS scheme and the enormous burden of implementing those and manning the phone lines was an enormous challenge. Overall, we have to admit, though it’s painful to do so, they did well!

We assumed that the fall out from this extra workload, along with continuing sickness absence was the justification for some of the delays to payments that we’ve been hearing about, through the jungle drums of the accountancy industry.

It seems there’s more to it.

1. Because of the decreased profits from which many people have suffered, HMRC are dealing with more repayments than is usual.
2. In 2020, the Individuals and Small Business Compliance Unit started to send credibility check letters to some taxpayers who were waiting on a refund, to check their identity. These have continued, though they were thought initially to have been a one-off or limited term project.
3. Not only have the identity checks been extended, but they now include some informal reviews too. In one recent case, the recipient’s identity was verified, but HMRC still withheld the refund as it had found ‘potential issues’ that needed to be checked. Though there is no confirmation of the outcome of this particular case, the implication is that the review process may have reduced the repayment amount or additional tax may have become due.

These ‘technical reviews’ have not been publicly announced, and it is only through reports amongst our industry colleagues that we’re finding out about them. Thankfully, so far, none of our clients have been affected. It does appear though, that we now have a new level of enquiries occurring, under the radar.

What if you’re waiting for a tax refund?

Where a client is due a refund of tax, we always ask them to let us know if the refund isn’t received within the usual six to eight week period after the submission of the Return. This is what we’d expect to be the maximum time period for it to be received. If it’s not received in that timescale, we’ll contact HMRC to see if we can hurry it along.

We can’t guarantee that our attempts to do so will result in it arriving any sooner, but we’re always happy to try!

If you submit your own Tax Return to HMRC, and haven’t received any refund that you may be waiting for, you might want to contact them to find out exactly why it hasn’t been released. If you’d like our help, please get in touch.