Income tax repayments – further update from HMRC
By Susan Cattell, Head of Tax Technical Policy
13 December 2021
ICAS has been raising Members’ concerns about HMRC service standards, including delays to income tax repayments. HMRC’s latest update confirms that at the end of November it is now up to date in handling ITSA repayment post. However, there may be further delays in some cases where identity verification checks have taken place and HMRC has decided to review the returns.
HMRC delays
The pandemic has caused significant problems with HMRC service levels, with backlogs building up in a range of areas. We have had reports from Members about delays of all kinds, including processing VAT registrations, paper CGT returns, s690 applications, CT repayments and ITSA repayments. We have been raising these concerns with HMRC at regular meetings of various HMRC forums and via the online agent forum. There have been improvements in some areas although these have not always been consistently maintained; in some cases, it seems that moving HMRC resources to tackle a problem may simply be moving the problem somewhere else.
ITSA repayments and identity verification checks
Delays to ITSA repayments have been complicated by HMRC’s checks to prevent abuse of its systems. Where HMRC perceives a risk, repayments are put on hold whilst HMRC carries out checks. The pandemic has seen a huge increase in online fraud and criminal attacks in general. Attacks on HMRC have also increased and hence more checks have been launched. We have received reports from Members of taxpayers with legitimate claims being affected by HMRC identity verification checks; completing these checks has been creating additional delays in these cases.
HMRC’s latest update
Following discussions with HMRC at the Compliance Reform Forum in October, HMRC told ICAS and other professional bodies that it expected service levels for ITSA repayments to be back to normal by the end of November, as reported in an earlier article. In its latest update HMRC has confirmed that it is now up to date in handling ITSA repayment post. Going forward, replies to post relating to repayments should be received within 30 days.
However, there could be further issues in some cases where identify verification checks have taken place. Affected taxpayers are receiving a letter from HRMC (copied to agents where relevant) explaining that their return is being reviewed and that this could result in a reduction to the repayment or in additional tax to pay.
Full details are set out in this note from HMRC to Compliance Reform Forum members:
During our meeting of 20th October, we advised that we have significantly increased resource onto Income Tax Self-Assessment repayment checks to reduce delays in genuine customers receiving tax refunds.
This update is to let you know that we have worked through all the post where needed to complete the verification process. We completed this by the end of November and are now up to date in handling ITSA repayment post. Going forward, customers should expect to receive a reply to post received within 30 days. Thank you for your patience and understanding as we have worked through our post arrears.
However, as we have done this, we have identified a minority of cases where customers have confirmed their identity satisfactorily but where we have found issues regarding one or more aspects of their return. We are working through these as quickly as possible to make any corrections required, which may either reduce the repayment or mean that the customer may owe us some tax.
We have issued a holding letter to all those affected (copying in their agent where applicable), committing to write again this month with any issues we have identified. While we appreciate this may be a source of further frustration to those affected, the volume of returns and verification correspondence we have had to process has meant that it has only been possible to identify and respond to the remaining issues now. I am sorry for this further delay. We are working through all these cases at pace and hope to have this process finished shortly, and certainly by the end of December.
A clear note with the latest position has been made on the customer record in case they contact one of our helplines. We are asking customers not to contact us regarding this matter, however, until they have received the outcome of our review. This will allow us to concentrate on following through on our commitment to write again quickly with our findings. But if a customer genuinely needs extra support, then they can contact our helpline in the usual way. We have also updated our Customer Services Group colleagues who answer customer calls with our latest timescales for handling post.
Recognising the issues you have brought to us, we are undertaking further evaluation of our risk targeting and processes in this area, with an aim to continue to streamline the journey for customers awaiting Income Tax Self-Assessment repayments. We will of course continue to keep you updated of improvements we are able to make.
Problems after 30 November – please let us know
If you are still seeing problems with ITSA repayments after 30 November – i.e. post relating to repayments not being actioned within 30 days (or identity verification cases where HMRC issues the holding letter described above but does not follow up by the end of December) – we would like to know. Email tax@icas.com.
Other problems raised with HMRC this year related to the UK Property Reporting Service. Following discussions with professional bodies, including ICAS, HMRC issued some guidance on the interaction between CGT overpayments on residential property disposals and ITSA liabilities – let us know whether the process set out by HMRC is working. HMRC is preparing detailed guidance on the UK Property Reporting Service, so watch out for this being published in due course. In the meantime, this earlier article provides a link to an HMRC Q&A document issued in July.
We regularly attend meetings with HMRC at which service levels, delays and other administrative issues are discussed, and we raise problems being encountered by Members. Please let us know about any ongoing problem areas by emailing tax@icas.com.