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TW Ed thinks that HMRC should play fair when it comes to repaying money to taxpayers.

I read recently that Mr. David Cameron is contemplating a change in the law to encourage large businesses to pay smaller firms on time.  Perhaps unsurprisingly, the chairman of one of those large firms has since written in to the Financial Times, suggesting that HMRC might like to take note. According to reports, the letter complained that HMRC had been 20 days late with a VAT repayment of around £300,000, and there were ongoing delays with repaying a further £1m.

Those of us who deal regularly with HMRC might chuckle at this, for all the wrong reasons:

• HMRC is frequently so bad at repaying taxpayers’ money that a 20-day delay is arguably fairly prompt, in their eyes
• If anything, VAT repayments tend to be fastest / best-managed of HMRC debts.

Anyone dealing with the construction industry, for instance, would be delighted to receive a Construction Industry Scheme or CIS repayment within a mere 20 days. My own “Personal Worst” experience of dealing with delayed CIS refunds is 3 months, while a colleague in a recent Working Together meeting had a client who was still waiting after 6 months!

In the case I dealt with, it turned out that HMRC thought there was a discrepancy between the CIS credits HMRC had on file, and the amount shown on the taxpayer’s tax return. However, this was revealed only after I queried the delay. Which in turn meant that HMRC had failed to follow its own guidance on dealing with such cases, which is to open an enquiry (which if nothing else at least tells the taxpayer why there is a delay) and to repay any amount which is not queried. When I pointed this out to HMRC, the client soon received a refund – strangely, for the full amount!

There are several tax cases where HMRC has issued penalties against a taxpayer for the late payment of one tax, knowing full well that the reason why the business cannot pay is that it is owed a larger repayment of another type of tax. We recently pointed out the significant differential between the interest rate which HMRC charges taxpayers, and the rate it applies when it is itself slow to repay. It is high time HMRC held itself to account – and did something about it.

Regards all,

TW Ed