HMRC’s interest double standards are deeply unfair
HMRC’s double standards on interest are deeply unfair, say leading audit, tax and business advisory firm, Blick Rothenberg.
Tom Goddard, an assistant manager at the firm, said: “The double standard on interest accumulated when a taxpayer owes HMRC verses when HMRC owes the taxpayer is deeply unfair. The daily late payment interest charge for being a year late settling a tax liability currently stands at 7.75%, but the interest taxpayers get on rebates while the Revenue sits on it, often for months on end, it is a measly 2.75%.”
He added: “On top of the daily late interest charge, taxpayers are hit with a 15% penalty on the outstanding amount owed if payment is more than 12 months late, additional penalties may also be incurred if the submission of the tax return is also late. They do not get any additional compensation from HMRC for the Revenues late payments of rebates.”
Tom said: “HMRC’s reasons for late repayment are often administrative – and unlike for some vulnerable taxpayers, a delay in the Revenue being paid is potentially not financially ruinous for them.”
He added: “However, the other issue that needs addressing is the gruelling repayment process. If taxpayers make the appeal themselves, the monetary benefit can be negated on account of the despair of having to go back and forth for months with overworked and undertrained HMRC staff. Alternatively, they can rack up a not insignificant amount of professional fees pursuing the appeal which will likely cost similar to the penalties issued in the first place.”
Tom said: “For a client of mine, repayment took over a year to be processed. This was only after I spent many an hour being passed round the various departments at HMRC who all insisted the claim lay with someone else.”
He added: “The issue was then only exacerbated as a result of this specific individual missing out on what turned out to be a lucrative investment opportunity, as he had earmarked the repayment amount for this investment. The investment window was passed as a result of unrealistic delays provided by HMRC for when the repayment would be received, and my client is now financially worse of as a result. We are seeking advice on appropriate compensatory actions we can take… but I shan’t hold my breath.”
Tom said: “One of the three priorities HMRC have in their ‘Transformational Roadmap’ is to improve day to day performance for individuals and businesses. They intend to achieve this by moving to an autonomous digital system and aim to have 90% of all queries dealt with digitally. Whether this is the true reason behind the move, or if it is an attempt at reducing the estimated £20bn cost of HMRC to administer taxes I shall leave for you to deduce.”
He added: “Trust and faith in HMRC needs to be restored. If the system were to work efficiently so that enquiries are dealt with quicker by expert technicians, HMRC may find that individuals and businesses are more responsive to HMRC correspondence, and get their affairs ordered in a timely fashion. If taxpayers get compensation for HMRC’s delays, they may be more inclined to work with the Revenue rather than view it as an antagonist. This could support the erosion of the £46.8bn ‘tax-gap’, which is HMRC’s second priority.”