HMRC’s Tax Refund Fiasco: A Bureaucratic Nightmare Strangling Small Businesses

HM Revenue and Customs (HMRC) has once again proven itself to be a masterclass in inefficiency, leaving taxpayers and small businesses stranded in a quagmire of delays that stretch far beyond the already egregious four-month mark reported by frustrated accountants. The tax office’s latest debacle—processing tax refunds at a glacial pace while simultaneously axing a vital free online filing service—has sparked outrage among those who rely on timely refunds to keep their businesses afloat. This isn’t just incompetence; it’s a betrayal of the very people HMRC is supposed to serve.

 

Let’s start with the refunds, or rather, the lack thereof. Reports from professionals like Nikki Ainscough, managing director of York-based Equilibrium Accountants, paint a grim picture: refunds for overpaid tax or National Insurance, particularly under PAYE and the Construction Industry Scheme (CIS), are now taking well over four months—and in some cases, much longer. One of Ainscough’s clients, who submitted a PAYE refund request in March, was told to wait until August 2025 for their funds. That’s a five-month delay for money rightfully owed, and it’s not an isolated case. Social media platforms like X are ablaze with taxpayers venting about waits stretching to six, seven, or even nine months, with one user describing a £4,000 inheritance tax refund still unpaid after nearly a year.

 

Historically, these refunds took four to six weeks, a timeframe that, while not ideal, was at least manageable. Now, HMRC’s backlog is so severe that it’s processing requests from as far back as December 2024, leaving businesses and individuals in financial limbo. Ainscough rightly points out the stakes: “If the backlog is that big, it suggests a high volume of claims and a potentially substantial sum of money that is owing to small businesses and individuals at a time when cashflows are critical.” For small businesses already battered by economic uncertainty, these delays aren’t just inconvenient—they’re existential threats. Every pound trapped in HMRC’s bureaucratic black hole is a pound that can’t be used to pay suppliers, cover payroll, or invest in growth.

 

And what’s HMRC’s excuse? A vague nod to “backlogs” and the occasional mention of industrial action by staff handling PAYE and CIS refunds. Sure, strikes can disrupt operations, but they don’t explain why delays have ballooned to such absurd lengths or why HMRC seems utterly unprepared to address the issue. The tax office’s response is a masterclass in deflection: “We’re tackling response times for these refund claims by allocating extra staff to work on them,” a spokesperson chirped, while boasting about an 80% customer satisfaction rate. Eighty percent? Tell that to the small business owner waiting half a year for a refund or the taxpayer stuck on hold for 45 minutes only to have their call dropped.

 

But the refund delays are only half the story. In a move that reeks of tone-deafness, HMRC has announced it will shutter its free online filing service for company tax returns and accounts by March 31, 2026. This service, used by countless small businesses to file their annual accounts and calculate corporation tax, is being scrapped because it allegedly “does not meet modern digital standards or recent changes to UK company law.” Instead, businesses will be forced to shell out for commercial software, with costs starting at £15 a month or over £100 for a one-off purchase. One exasperated taxpayer summed it up perfectly: “This means people will have to subscribe to a commercial, paid product for the privilege of paying corporation tax to the government.”

 

Let that sink in. HMRC is not only delaying refunds that businesses desperately need but also piling on new costs for compliance. For small traders, local residents’ associations, or incorporated charities already stretched thin, this is a slap in the face. The free filing service, introduced in 2011 to ease the transition to online filing, was a lifeline for smaller entities with simple tax affairs. Now, HMRC is yanking it away, forcing businesses to navigate a fragmented market of third-party software providers—many of which charge recurring fees that add up quickly. And don’t expect much sympathy from HMRC; their spokesperson had the gall to claim that commercial software “provides a much better service.” Better for whom? Certainly not the small business owner already drowning in red tape.

 

HMRC’s defenders might argue that modernisation is necessary, that outdated systems must be replaced to align with the Economic Crime and Corporate Transparency Act or to combat fraud. Fine. But why is the burden of this transition being dumped squarely on the shoulders of taxpayers? Why hasn’t HMRC invested in streamlining its own processes to ensure refunds are processed promptly? Why is there no transitional support for businesses forced to adopt costly new software? The answer is painfully clear: HMRC prioritises its own convenience over the needs of the public it serves.

 

The hypocrisy is staggering. While HMRC drags its feet on refunds, it’s lightning-fast to slap taxpayers with penalties for late filings or payments. Miss a self-assessment deadline by a day, and you’re hit with a £100 fine, with interest accruing at 8.5% on late payments. Yet when HMRC owes you money, it’s perfectly content to sit on it for months, leaving you to chase them through endless phone queues or unresponsive online portals. One X user’s frustration captures the sentiment: @HMRCgovuk “How are gonna send me a cheque for my tax refund, I cheque it in, and then get told I can’t cash it cos there’s a block on the cheque, ring up for you to tell me the cheque is under investigation??? Absolute jokers.”

 

This isn’t just a failure of process; it’s a failure of accountability. MPs have lambasted HMRC for call waiting times averaging over 23 minutes and a tax system growing ever more complex. Parliament’s Public Accounts Committee warned that “taxpayers’ trust in HMRC is falling,” and with good reason. The Making Tax Digital program, meant to modernise services, has instead saddled taxpayers with hundreds of millions in extra costs. And yet, HMRC ploughs ahead, undeterred by the chaos it leaves in its wake.

 

Small businesses and individuals deserve better. They deserve a tax authority that processes refunds within weeks, not half a year. They deserve access to free, user-friendly tools to meet their compliance obligations, not a mandate to buy expensive software. Above all, they deserve respect—not the dismissive platitudes of an agency that seems to view taxpayers as an inconvenience.

 

HMRC’s leadership must be held to account. Heads should roll for this systemic failure, and resources must be redirected to clear the backlog and restore trust. Until then, HMRC will remain what it has become: a bureaucratic behemoth that punishes the very people it’s meant to serve. Shame on them.

Tax does have to be taxing.

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HMRC To Avoid Paying £5BN In Refunds

Citywire reports that HMRC could avoid paying up to £5 billion in interest on tax refunds after a landmark Supreme Court judgement at the end of a 15 year legal battle with insurer Prudential (PRU).

The Supreme Court yesterday ruled against applying compound interest to the bulk of the refunds due to the insurer on taxes paid to HMRC over nearly two decades that was later judged unlawful.

Yesterday's judgement carries major implications for HMRC, which is facing a series of similar pending legal challenges over tax refunds. HMRC has estimated the cost of paying compound interest on all these claims at up to £5 billion.

HMRC had already conceded a refund was due on tax that was applied on dividends paid by foreign companies held in the funds managed by Prudential for policyholders.

This tax was ruled unlawful by the European Court of Justice, as it discriminated in favour of dividends from UK companies, on which insurers were not taxed.

The Supreme Court ruled on five issues, finding in favour of HMRC and Prudential in two each, with the fifth rendered redundant by those judgements.

Prudential was successful in arguing that the tax refund be calculated according to the ‘nominal’, or headline rate of tax paid on those dividends from foreign companies, rather than the actual tax paid, which could in many cases be lower due to tax reliefs and exemptions.

Tax does have to be taxing.

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Refund of Stamp Duty Erroneously Paid

HMRC has confirmed that first-time buyers who have accidentally paid stamp duty on property purchases completed since the Budget on 22 November will be able to claim refunds.

Anyone who buys their first home for less than £300,000 will not pay any tax, while those who buy property worth up to £500,000 will get partial relief.

HMRC said the stamp duty exemption applied to any purchase completed on or after Budget day. Anyone who may have paid too much stamp duty should go to gov.uk and go to this link.
 

Alternatively address your request to BT  Stamp Duty Land Tax, HM Revenue & Customs BX9 1HD

Tax does have to be taxing.  

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Littlewoods £1.2BN Tax Refund

On July 3 the Supreme Court will hear an appeal brought by HMRC against Littlewoods, in the latest stage of its long-running dispute over interest payments on a tax refund dating back 30 years.

The FT reports that Littlewoods has already received a £204m refund from HMRC on VAT that was wrongly charged on commissions paid to its agents who distributed mail-order catalogues. It has also received £250m of simple interest on the VAT refund. However, the company contends it should have received £1.2bn of compound interest charged on the interest already earned.

Bill Dodwell of consultancy Deloitte said the case potentially had important consequences for claims by other companies:

“There are a lot of cases stacked behind this one.” 

Giles Salmond, a partner of Eversheds Sutherland said:

“If Littlewoods is successful, billions of pounds of interest will be payable to taxpayers in relation to various historic claims.” 

HMRC has estimated it would have to pay out as much as £55bn if it lost all the legal battles it is fighting with taxpayers.

However, HMRC has calculated it will only have to to pay out on a fraction of these cases. The provisions it has made for tax disputes total £5.9bn.

Tax does have to be taxing.

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HMRC Fesses Up To Repayment Delays

HMRC has told agents that it has identified delays in issuing repayments due under self assessment rules.

However, don't panic, for HMRC says it is working with the professional bodies ‘to establish the precise nature of the problem’.

Hoozah!

Tax does have to be taxing.

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HMRC Goes For a J Arthur

The hard pressed pub trade has just had another kick in the nuts by the state, courtesy of HMRC.

This is Money reports that thousands of publicans have been sent letters by HMRC demanding they pay back money originally returned to them as VAT overpayments on slot machines.

Some of the demands, which are also being sent to other leisure outlets with slot machines, such as bowling alleys, amusement arcades and railway station cafes, run into thousands of pounds.

This is as a result of a long-running battle between casino operator Rank Group and HMRC over whether or not VAT should be paid on slot machine income. It was first settled in favour of Rank Group, meaning that HMRC refunded the group more than £30 million and started paying out refunds to other slot machine operators. However, HMRC successfully appealed the decision in October last year and is now writing to reclaim the payments.

One publican is quoted:

‘This could cause serious problems for some publicans, many of whom earn less than £15,000 a year and who would have problems finding the money. Many have gone bankrupt and are still being chased for the whole sum.’

The farce is going to continue, as Rank Group is appealing the most recent verdict, with a court hearing set for April.

This is of course precious little comfort for cash strapped publicans.

Tax does have to be taxing.

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Corporation Tax Refund Delays

Figures obtained by UHY Hacker Young show that HMRC paid out £4.6BN to businesses in refunds for corporation tax last year. However, there appear to be delays in making these payments.

Approximately 286,000 businesses received a corporation tax rebate in the year to 31 March 2013, equivalent to an average refund in overpaid tax of more than £16,000 each. The norm for repayments to be received is around 2 to 3 months. However, some can take between 12 to 24 months.

Roy Maugham, tax partner at UHY Hacker Young, is quoted by Accountancy Live:

"UK businesses are still finding that they are overpaying their corporation tax in the billions of pounds. It shows how important it is for companies to regularly review any overpayment of tax as HMRC will not be looking to see if it owes them money."

Referring to the delays, he said:

"This can make the burden for companies struggling with unexpected losses or lower than anticipated revenues even heavier. It’s not unheard of for some to simply fold under the pressure in the meantime, as cashflow dries up.

Given that the number of rebates has been falling in the last few years, HMRC should be getting quicker but this doesn’t seem to be happening in reality."

I would be interested to hear from people about their experiences of obtaining a refund of overpaid corporation tax.

Tax does have to be taxing.

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Hargreaves Lansdown Challenges HMRC's Discount Tax

In March I noted that as from 6 April 2013 fund investors face paying income tax on "loyalty bonuses" paid by fund supermarkets, after HMRC ruled that the payments are "annual payments" and should therefore be taxed as income.

Hargreaves Lansdown (the UK's largest fund supermarket) has taken advice from counsel and decided to challenge HMRC's "discount tax", as the tax threatens their ability to pay loyalty bonuses and offer discounts on fund charges.

Chief executive Ian Gorham is quoted by Citywire:

"The introduction of the 'discount tax' was extremely disappointing news and an attack on the small investor. The 'discount tax' is anti-competitive. Loyalty bonuses have been hugely popular with investors and helped them save money on investing in their favourite funds.

We feel it’s important to take a stand on behalf of investors. When we introduced loyalty bonuses we consulted on its tax position and it was clear, as a refund of charges, it should not be subject to taxation."

Hargreaves Lansdown believes that it has saved investors over £1 billion in discounts and loyalty bonuses.

The legal challenge, unsurprisingly, is expected to take several months. The tax due to HMRC is being held in a fund while the issue is resolved. If Hargreaves Lansdown loses, the money will be paid to HMRC otherwise it will be returned to its clients.


Tax does have to be taxing.

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IT Matters - System Hack?

My commiserations to a loyal reader who wrote to me the other day, regarding a refund made to her by HMRC which ended up being sent to the wrong person/account.

She has given me permission to publish her email to me, and asks if anyone else had similar experiences?

"...Self-employed, so have fluctuating income. HMRC makes demands for up-front payment for which I don't have funds in my HMRC account, therefore charges interest on any shortfall. In spite of request for respite, this is declined. So, now have to have significant funds in account.

Return from business trip abroad to find letter from HMRC to tell me that my claim for repayment is being refunded to the tune of £5,000 (just the sum in the account), only the person and account to whom it is "refunded" is not me or mine.

Horrified, ring HMRC who are now to investigate.

I am now in a state of panic as:
a) HMRC demand I keep money with them
b) HMRC appears to have been hacked, or it's some sort of inside job
c) HMRC has my bank details
d) HMRC may continue to expect me to keep money with them...

oh yes, and e), f), g) etc. I cannot expect interest on the sum they have taken from me, they have every security detail I own, I will be expected to pay up on time for fear of penalty, HMRC appears to have wide-open security itself etc.

Am writing to Margaret Hodge MP and my own MP, but I am one very furious taxpayer."

There has, subsequent to the above email, been a development:

"Things moved along a little yesterday and I discovered that the bogus “refund” had been revoked/recalled, suggesting that it has been held up in their system.  That’s good news if it means it hasn’t gone to the hackers, but it is still deeply disturbing that HMRC has it on record that my account was logged into on 24 May when I know I have not logged into it for months. "

Comments and views welcome, as always.

Tax does have to be taxing.

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HMRC Refunds Taxpayers Twice!

Last week I wrote that some people who had tried to pay their tax bills via Santander's BillPay system had been charged twice. As per HMRC:

"At the end of January, Santander experienced technical problems with their BillPay system resulting in some people making more than one payment. We have already started repaying overpaid tax to those affected and we expect to have this work completed by tomorrow. 

Santander will cover any bank charges incurred by HMRC customers as a consequence of this incident."

It now seems that some of those same people, who HMRC refunded to correct the error, have been refunded twice.

The Telegraph reports the case of Mr Jones, an insurance broker from Leicestershire, who had almost £20,000 taken from his bank account last Thursday when his tax bill was charged twice.

HMRC have since apologised and have repaid his tax bill – twice. Mr Jones said:

“I worry now they will take both payments back and I’ll be back to square one.

I think they rushed to get the payment returned to me, and then someone processed it again. It’s just unbelievable.” 

A spokesman for HMRC said:

"We apologise to Mr Jones for the repayment issued to him in error. We can't comment on individual cases but have contacted him to say sorry.”

Has anyone else been double refunded, if so please let me know?

Tax does have to be taxing.

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Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

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Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

HMRC Delays Repayments - Updated

Economia reports that a survey, conducted by Bloomsbury Professional, highlights a consensus amongst those taxpayers surveyed that delays by HMRC in paying tax rebates are worsening.

Martin Casimir, Bloomsbury’s managing director, is quoted:

“HMRC does not pay any interest on tax repayments which effectively gives it an incentive to drag its heels.

The concern for taxpayers is that the amounts involved can be substantial, which can cause serious cashflow problems. 

Businesses have been known to get into financial difficulty, or even go bust, while waiting for a tax rebate from HMRC.”

Delays in the payments of rebates have been discussed on this site before. Therefore, as ever, I am interested in hearing the views of loyal readers.

Do you agree with the survey's conclusion?

UPDATE

Oops, red faces all round.

As was quite correctly pointed out yesterday, by a loyal and observant reader, Martin Casimir's assertion that HMRC does not pay interest on tax repayments is wrong. HMRC (as I noted in the comments section) does in fact pay 0.5% (perversely it charges 3% for late payments).

I wrote to Martin yesterday about it, and Bloomsbury have acknowledged that they were wrong and will be asking Economia to correct their copy.

It is shameful that Economia (the professional magazine of the ICAEW) and myself (an FCA) didn't spot it when we published Martin's quotes!

So well done and thanks for pointing that out, and mea culpa on my part for being asleep yesterday!

Tax does have to be taxing.

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Click the link to read about: Tax Investigation for Dummies

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The Fear

Christopher Lunn, the accountant who runs CLAC (Christopher Lunn and Company), which has been in a protracted dispute with HMRC, has been featured in the Telegraph.

The paper says that Mr Lunn claims that HMRC has attempted to frighten his clients into paying tax that they do not owe, and that the investigation has been "a catalogue of blunders".

His clients have received letters informing them that any tax rebates due have been frozen because of the investigation, and others urging them to make a full disclosure of any irregularities that they are aware of in previous tax returns.

One letter, dated July of this year, addressed clients who had not contacted HMRC "with the intention of making a full disclosure".

The letter added:

"I have noted that to date you have not contacted me with the intention of making a full disclosure. I will now be checking your tax returns and if I identify any irregularities then I will deal with these matters either by criminal or civil procedures open to HMRC depending on the nature of these irregularities. 

"Please note that until we have checked your Tax Returns, HMRC will not be making any repayment of monies shown as being overpaid."

HMRC have confirmed that Mr Lunn's clients are not being paid any money at present.

"We have endeavoured, throughout our dealings with CLAC's clients, to give them every opportunity to come forward and discuss their affairs with us.

We wrote to all clients on 29 July, 2011, explaining that repayments would not be made until all returns had been checked. All repayment claims are currently being reviewed and individual claimants will be contacted shortly."

No charges have been brought against Mr Lunn, and there is no suggestion that his clients deliberately mislead HMRC.

Clearly this is another case to watch with interest.

Tax does have to be taxing.

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Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

HMRC Hackers

There was a rather interesting article in yesterday's Sunday Times, about hackers gaining access to HMRC systems and diverting tax refunds.

The article also refers to an earlier piece on this site (published in June 2011) about 91client accounts being hacked. The Sunday Times uses the "polite" alternative domain name of this site www.hmrconline.com.

Here is the article in full:

Tax rebates stolen by Revenue and Customs hackers

HMRC has emerged as the most recent target of hackers after fraudsters tap refunds system and divert funds into their own accounts

Jon Ungoed-Thomas and Cal Flyn


Fraudsters have found a way to hack into government tax records and divert refunds meant for others into their own bank accounts.

An investigation by The Sunday Times has revealed that criminals are secretly examining HM Revenue & Customs’ records looking for anyone who has paid too much tax. They then change the details of the bank accounts into which the repayments are to be made.

Alternatively, the hackers file fictitious tax returns showing large overpayments directly into the HMRC computer in the names of genuine taxpayers, then ask for refunds.

Victims become aware of the scam only when they are officially contacted by HMRC and told an overpayment is being transferred into their account.

HMRC is now facing questions over its security procedures and how the hackers are able to infiltrate its records. Experts claim it has failed to react as promptly as the banks to the risk of online fraud.
Roger Symes, 53, a ship broker from Surbiton, in south-west London, received a letter last month from HMRC advising him of a refund. He said: “They gave details of a bank account into which they were paying the money, but it wasn’t my bank account.

“My accountant said he had the same problem with 18 other clients.” The refunds applied for were between £100 and £4,000.

The hackers are accessing the tax files using the sign-on and passcodes assigned to accountants who file clients’ tax returns online. How they are obtaining these security details is unclear. It is not known whether it is via computer attacks on individual accountancy firms or by breaching HMRC’s own systems.

One hacker who spoke to The Sunday Times this year said he had accessed HMRC’s systems and had been able to obtain details of agent sign-ons and passcodes. A security expert said the claim was credible but HMRC denied its systems had been compromised.

Once a hacker has an agent sign-in, he can read the tax records of all the accountant’s clients, amend them and change the bank account details. Accountants who have spoken to this newspaper said hackers have been accessing taxpayer records for at least two years.

Claire Savage, a chartered accountant in Milton Keynes, Buckinghamshire, spotted irregularities in one of her clients’ files in June last year.

She said: “I called him up to ask about his new bank account, which turned out not to be his at all. When I realised that security had been breached I went through all of my clients’ files. A fair chunk of them — around 10 — were affected, and repayments of up to £3,000 had been requested in each case.” None of Savage’s clients lost money to the fraudsters.

Ralph Hayden, a chartered accountant at GW Cox & Co in Frinton-on-Sea, Essex, said 41 of his clients had been affected by a similar scam, which was first noticed in November 2009.

He said: “HMRC said that it must be our systems that had been breached but we called in computer experts who confirmed that it definitely wasn’t.

“In most cases, a tax return had not yet been filed, so a false return was submitted. In others, their returns had been edited, so that a repayment was now due. HMRC were not advising their frontline staff in case it was an inside job.”

On hmrconline.com, a blog about the HMRC, one taxpayer reveals that his accountant was also targeted. The posting states: “We recently returned from holiday to the news that 91 of our accountant’s client accounts had been hacked at the HMRC government gateway website.
“Hackers had accessed information on 91 individuals or organisations and had entered false end-of-year accounts in order to claim self-assessment refunds.

“We then received a letter from HMRC to advise us that the refunds were on their way to what we knew were false accounts. They actually paid out. HMRC now apparently know what they have done but to add insult to injury they have now started to send demands for repayment to the people [whose] accounts had been hacked.”

Unlike HMRC, the big banks ask customers conducting transactions online to provide additional passcodes for each financial transaction. These are generated by inserting a bank card into a hand-held reader provided by the bank.

Jason Hart, managing director of Cryptocard, a computer security company, said: “If you just had a static passcode, then once it’s compromised, you’re going to be a massive target for the fraudsters. It’s an invisible threat because they can get into your system at any time and you don’t even realise.”
A spokesman for HMRC said: “We take the security of our customers’ data extremely seriously and we do not discuss the details of our security defences ... We actively monitor repayment transactions and continue to address any fraudulent repayments.”



Tax does have to be taxing.

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To find out more, please use this link Taxwise

Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

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Destined To Fail II

Those of you on the receiving end of a tax demand from HMRC for underpaid taxes emanating from HMRC's reconciliation of its PAYE "backlog" would do well to remember that there may be a way to avoid having to pay these backclaims.

Extra Statutory Concession (ESC) A19, states that HMRC should "forgive" a tax claim if it has not followed its procedures correctly.

HMRC should not claim tax if it has failed to properly use information supplied by a taxpayer, their employer or the Department for Work and Pensions.

The Telegraph quotes Jeff Taylor, editor of The Economic Voice:

"This concession applies to income tax and capital gains tax and allows someone to ask to have the tax debt remain uncollected as long as two important circumstances exist. 

The first is that HMRC must have been in receipt of all the relevant information and have used it within 12 months from the end of the tax year concerned. 

The second is that HMRC must be satisfied that the taxpayer had a 'reasonable’ belief that their tax affairs were in order."

Good luck!




Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Good News! - HMRC Destined To Fail

Good news everyone, HMRC is now in the process of settling outstanding discrepancies (some going back to 2001).

Seemingly, over this period, HMRC has taken excess tax of £2.5BN and under collected £720M.

The result of the above discrepancies will mean that over 6M will receive a refund in the next few weeks of around £400.

Hoozah!

However, around 1.2M people will receive a bill for £600.

The discrepancies have come to light following HMRC's reconciliations of PAYE, as a result of the introduction of a new IT system.

HMRC note that these discrepancies that are now being highlighted are merely the end product of them clearing a backlog that had built up.

HMRC also note that things will now improve as the new system "beds in".

So are we to assume, and believe, that everything from now on will be fine?

Errmmm....sadly no!

For why?

Well, many reasons actually. However, to keep things simple, here are just two:

1 The new universal credit system is allegedly meant to be up and running by 2013. However, as already noted on this site, it will miss the deadline.

2 The HMRC capability review is now hitting the mass of managers below SCS. We can expect the upheavals emanating from that to cause a significant decline in TAXPAYER (I refuse to use the"C" word) service levels next year.

All in all, expect things to get worse rather than better.

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Ker Farking Ching!

Thanks to the incompetence of our political "elite", the country is broke.

Therefore no one should be under any illusions that the state, in order to maintain its existence, will do all it can to extract every last penny from the taxpayers.

ICAS have issued a timely warning concerning the aggressive new penalty regime being applied by HMRC as from October.

Instant £100 fines will be applied for even a one day delay in filing, together with additional fines for lengthier delays.

"If people are even one day late in filing their paper self-assessment tax form they will be hit with an instant £100 fine. After another three months an additional fine of £10 a day is added for each day overdue, up to a maximum of £900. Tougher fines are added if passing the six month or one year mark; the larger of £300 or five per cent of the tax due.

From the 31 January next year the same will apply for people who file their form online. So a return due by the end of January 2012 but not filed until 5 August 2012 would attract £1,300 or higher in fines.

According to ICAS, the professional body of Chartered Accountants (CAs), since self-assessment was introduced in 1997, nearly one million people each year have been late in filing their return. Many people delay submitting their return for longer than 12 months. Until now so long as the person had paid all the tax due no penalty could be charged by HMRC.

Derek Allen, Director of Tax at ICAS, said:

'We are concerned that most people will not yet be aware of these new penalties as they have not been widely communicated. Based on the last decade of experience, at least one million people could find themselves liable to the additional penalties.'

The new penalties could also see taxpayers losing out on tax rebates from HMRC. This is particularly relevant for self- employed in the construction sector, where tax is often deducted initially by the contractors. Individuals are then due repayments after calculation once they lodge a return. However, under the new rules if the return is late the repayment owed will be a lot less because it has been used by penalties."

Suck it up people, the country is broke and the political "elite" have no intention of removing their snouts from the trough.

Ker Farking Ching!


Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

More Cock Ups?

The Telegraph reports that there may be some more cock ups in the tax system, as a result of "issues" in HMRC.

The paper quotes Richard Mannion, a director of Smith & Williamson:

"The first problem concerns HMRC asking for tax repayments to be sent back and the second relates to online requests sent by taxpayers under the self assessment system which seem to have been lost by HMRC’s computer system.

In short, it appears that the tax authorities did not include the employee benefits as shown on forms P11D when working out if people had paid the correct amount of tax for 2009/10 and so under-estimated individuals' tax liabilities. Consequently thousands of people who got a refund just a short while ago could now get a tax demand to the tune of several hundred pounds or more."

With regard to the first issue, it is of course correct that if there has been an error wrt the repayment of tax then HMRC should reclaim it. However, human nature being what it is, it is highly likely that any monies paid back to taxpayers will have been spent.

HMRC, quite correctly, point out that this is the way the system works; ie where the benefit is new in 2009/10 the first HMRC knows about it is when the P11D is sent to them by the employer by July 2010. The issue should normally be "coded out" if less than £2K, and therefore no monies will be reclaimed in the form "hard cash".

However, the Telegraph (cynically?) notes that HMRC made similar statements, playing down the scale of its PAYE errors in August, before admitting to the massive scale of the problem.

These "reconciling" errors may well be more numerous than HMRC are admitting.

Mr Mannion then goes on to highlight another issue:

"The second issue concerns online requests for repayment or for the reduction of tax payments on account, sent by taxpayers to HMRC during the six weeks between October 1 and November 15 this year. It appears that any online requests for help of this type have been lost and not acted upon by HRMC.

Although the problem has now been fixed, anyone who falls into this category should get back in touch with HMRC and reissue their request. This applies even though you may have had a receipt from the tax authorities saying they got your request.

There could be thousands of people up and down the country who think they have successfully communicated their request to HMRC but in reality they will just have to do it again."

HMRC are of the view that this only a affects a few people.

Time, for both of these issues, will tell!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"