I have become increasingly frustrated in recent weeks at the growing delays on PAYE refunds; and it appears I am not alone from reading the posts of others accountants’ experiences on the AccountingWEB forum.
Tax Accountants’ Frustrations
To take just one example, AJ Cook & Co recently reported on their frustrations with the progress of a client’s overpayment of £12,500 of PAYE in 2014-15. HMRC’s employer’s helpline advised them that the earliest date their client could expect the refund to be processed is 29th August 2016, some 10 months away. The helpline adviser explained that the delay was due to a “backlog of cases”.
“We’re flabbergasted that HMRC can get away with this, even the guy on the helpline sounded embarrassed,” said AJ Cook & Co. “HMRC’s PAYE department is long overdue a public enquiry, specifically on delays in dealing with refunds”, they added.
Faced with a similar delay, another accountant I know, Jim Merrington, after weeks being fobbed off by HMRC took a client’s case up with his local MP and low and behold, HMRC expedited the refund.
Recently, our Office Manager who deals with payroll for clients, complained to me, “I’ve just spent yet another morning stuck on the HMRC helpline with a PAYE issue and I was using the accountants’ dedicated phone line, so God help the individual taxpayer trying to get through”.
The issues have been brewing and building up over the course of several years, but HMRC sensitivities over potential fraudulent refund claims, combined with data integrity issues on their own computer system, have created the perfect storm to completely gum up the works.
HMRC are terrific at chasing money that you allegedly owe them, but when they owe you the process slows down to the pace of a geriatric snail. Their only defence is, “We’re trying to protect taxpayers’ money by cutting down on fraud”. Not a valid excuse for holding on to taxpayers’ money for the best part of a year, especially when the overpayment was caused by their error in the first place.
A large part of the problem is that they overlooked overpayment refunds when they created RTI. It now appears to be virtually impossible to get PAYE refunds through RTI without jumping through hoops.
In fairness to the Revenue, a lot of times refunds happen because people have made mistakes and typed something wrong on the RT1 Submission; but it shouldn’t take months for HMRC to accept that a simple error has been made and pay back the money; especially as the Tax Office themselves constantly make mistakes.
Another problem with the RTI software is the Earlier Year Update (EYU), which you do on RTI to show the difference between what you originally reported and the correct figure; but when you try to get back what rightly belonging to the taxpayer, the EYU generates a report that a refund is due, but there’s no next step thus making it impossible for the next bit of the process to happen, which is to give you the money back.
The PAYE refund log-jam comes at a time when political debate is flaring up around welfare reform and tax credit cuts, which can’t happen because the underlying data on which Universal Credit is predicated is flawed and cannot be used to make welfare decisions, which puts the government in a rather interesting position.
A Tax Accountant’s View
My dearest hope over the next few months is that the current shambles will bring into the spotlight the fact that HMRC’s data is unfit to both run PAYE and welfare reforms.
Perhaps then The Revenue will have to admit that there are inherent design flaws in RTI which are causing major problems to taxpayers and welfare recipients alike and in a perfect world the Treasury will act and give HMRC the resources they need to sort it out.
However, I am not convinced that such a review will come about unless ministers or possibly the National Audit Office, forces HMRC to confront the underlying problems.
If any of you would like more detailed information on any aspect of UK Tax Returns, send me an e-mail and I’ll be pleased to advise further.