It is estimated that the tax authority owes billions to both businesses and individuals as furlough schemes and Brexit bureaucracy stretches HMRC staff resources to breaking point.
Thousands of UK taxpayers owed hundred of millions of pounds in tax rebates between them are having to wait at least six months to get their money back from Her Majesty’s Revenue and Customs (HMRC).
The delays are understood to have been caused because of the increased demand on tax authority staff arising out of the management of Covid furlough payments and an increased workload due to post-Brexit paperwork.
Hundreds of HMRC’s more experienced staff have been transferred to deal with furlough payments to both companies and the self-employed, and while the organisation has recruited additional staff to deal with applications for tax rebates a lack of experience among these workers is thought to have added to the delays.
The demands being placed on HMRC from a large increase in VAT registrations from overseas firms that were able to trade without issue in the UK before the Brexit trade deal came into force at the beginning of this year has also added to delays in paying both companies and individual the tax rebates they are owed.
Paul Haywood-Schiefer a tax manager at leading tax and advisory firm Blick Rothenberg said: “We have been advised, and indeed have seen ourselves, that some repayments from the revenue are taking up to six months before they will be repaid, causing many taxpayers anxiety.”
Mr Haywood-Schiefer pointed to an example when he called HMRC on behalf of a client at the start of April about a repayment request. The tax rebate had been included by the client on their tax return and would usually have been resolved within weeks.
“We were told that the request for repayment might not be dealt with until the end of September,” said Mr Haywood-Schiefer. “This clearly is not acceptable when HMRC themselves will be expecting self-assessment taxpayers to make a second payment on account by the end of July.”
He added he was aware of a number of other clients facing significant delays in their tax rebates.
He said: “We are having to make multiple calls to HMRC to chase these.”
HMRC pays interest of 0.5 per cent if taxpayers are in credit, but if people owe money to the tax authority the late payment interest is currently 2.6 per cent before other penalties.
“If you owe HMRC money then they will chase you for it,” said Mr Haywood-Schiefer.
“The Government did allow people to defer their 2020 second payments on account last summer and allowed those with tax liabilities of up to £30,000 the chance to pay their January 2021 tax bills in instalments.
“These measures were welcomed to help taxpayers manage their cash at a time when many may not have been able to work, but if you then have other taxpayers waiting six months to get their money back for a valid repayment claim, you are causing cash flow problems to those taxpayers.
“This now is really beginning to impact its “customers” who are not getting the service they need, and the Government needs to stop sitting on money that is not theirs.”
A spokesman for HMRC said: “We’re doing all we can to process self assessment rebate claims as fast as possible and are sorry to any customers who have waited longer than they expected. We’re continuing to redesign our business to meet our customer demand needs in the most effective way, based on our available resource.