Income tax repayments – getting back on track?
By Susan Cattell, Head of Tax Technical Policy
3 November 2021
ICAS has been raising Members’ concerns about service standards and delays with HMRC - including delays to income tax repayments. HMRC has now told us that they expect ITSA repayments to return to normal by the end of November.
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 (for residential property disposals), s690 applications, CT repayments and ITSA repayments. We have been raising these 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.
Unfortunately, the general backlog in dealing with ITSA repayments and post has meant that having completed the verification process, cases return to the back of the queue; the overall delay to the repayment can therefore be substantial.
HMRC Update
Following recent discussions with HMRC at the Compliance Reform Forum, HMRC has delivered the welcome news that it expects service levels to be back to normal by the end of November – and issued the following update to ICAS:
“HMRC are currently undertaking an increased level of checks to stop criminals abusing our Income Tax Self-Assessment repayment systems. This means that unfortunately some of our legitimate repayment customers have been experiencing delays in receiving tax refunds.
We have significantly increased resources to minimise delays and expect to have brought our customer service levels back to normal by the end of November, at which point ITSA repayment related post will be actioned within 30 calendar days of receipt.
Further background
- We must balance our commitment to good customer service with our vital role to protect public funds from criminal attack.
- Preventing these fraudulent repayment claims is a critical part of HMRC’s efforts to protect the public purse from the small minority seeking to abuse the system.
- We prioritise preventing these fraud attacks before repayments are made, so all claims for ITSA repayments are checked before any money is paid.
- Claims identified as a risk are suspended and subject to further checks by our compliance experts. If we’re satisfied the claim is genuine, the repayment will be released. If we are not, the claim will either be cancelled or amended to a lower value.
Minimising the impact on all genuine customers is important to us. We recognise we are facing some significant challenges and that our current service performance to legitimate customers is not at an acceptable standard and have therefore deployed additional resources to help us get back on track.”
Problems with HMRC systems – please let us know
If you are still seeing problems with ITSA repayments after 30 November – ie post relating to repayments not being actioned within 30 days - we would like to know. Email tax@icas.com.
Other problem areas raised with HMRC earlier in the 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.
As you may have seen in the Budget, the deadline for UK residents to report and pay CGT on UK residential property will also increase from 30 days to 60 days (for disposals completed on or after 27 October 2021). HMRC are in the process of preparing detailed guidance on the UK Property Reporting Service so watch out for this being published in due course – in the meantime our 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.