Accountants have warned that HM Revenue & Customs is taking longer to refund people who have overpaid tax.
Several advisers told FT Money growing numbers of clients were waiting months rather than weeks to get their money back.
The accountants attributed the increased delays in refunds to several factors, including the impact of the Covid-19 pandemic, which saw HMRC resources redirected to administer support packages, and tightened credibility checks when sending out repayments.
“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,” said Zena Hanks, partner at Saffery Champness, an accountancy firm.
“[This] causes real distress to taxpayers, many of whom will be understandably concerned about cash flow after a difficult couple of years in Covid trading conditions.”
Hanks said she had generally found that larger sums of money took longer to come through. One client who had a £1mn refund waited several months, while others with large repayments pending had waited more than a year.
Phil Kinzett-Evans, partner at accountants UHY Hacker Young, said the amounts involved in tax refund delays he had seen had varied, including some with relatively low values.
HMRC pays an interest rate of 0.5 per cent on money it owes taxpayers, a rate described by Kinzett-Evans as “derisory”. “It’s not worth anyone making overpayments to HMRC,” he said.
A freedom of information request to HMRC showed a steady decline in the number of refunds issued by the tax office between 2017-18 and 2020-21.
The FOI submitted by accountants Saffery Champness showed that in 2017-18, of 2,889,037 repayments generated, 2,673,701 were successfully cleared by HMRC. This was equivalent to 93 per cent of the total owed.
In 2020-21, the latest year available, 3,206,082 tax repayments were generated and 2,704,031 cleared — equivalent to just 84 per cent of refunds owed.
HMRC said the difference did not indicate delays in refunds but was due to repayments being cancelled after it had carried out an identity or compliance check.
Noel Mooney, associate director at accountants RSM, said in his experience the enhanced checks, which had been introduced over the past two years, had “failed to reach the intended demographic”.
While he said HMRC’s desire to prevent fraud was “commendable and the right thing to do”, the checks targeted low-risk people who had often generated refunds for standard reasons and were left waiting months before being cleared for repayment.
Mooney said one client had been waiting nearly six months for a refund of £77,000 — generated because he overpaid what he owed on accounts.
Sent a credibility check about the refund, he immediately replied to it. HMRC wrote back to say he had passed the verification in November 2021, but added it would be undertaking further checks — without providing further details.
It said there would be a response by the end of December 2021, before later pushing back the date to the end of March. Mooney said the case had now turned into a formal complaint. HMRC said it could not comment on the case due to taxpayer confidentiality.
HMRC said it was “taking action on behalf of the vast majority of honest taxpayers to ensure only those entitled to repayments receive them”.
It added that about 3 per cent of “legitimate customers” would experience a delay in their repayment claim as a result of the checks.
“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.”