‘Why should I endure HMRC's pitiful interest and a six-month wait for my tax refund?'

Telegraph

08-04-2025

Email your tax questions to Mike at [e-mail].
Dear Mike,
The Spring Statement included measures to crack down on tax evasion and fraud, thought to net the Treasury £1bn over next four years. However, there is another side to the story, because HM Revenue & Customs (HMRC) is sitting on overpaid tax.
I invest in the SEIS (Seed Enterprise Investment Scheme) and get tax relief, but it is always a job getting HMRC to pay the reliefs due.
I have a long list of the unsuccessful attempts made to recover the tax, both in writing and by phone. If someone answers they might be working from home and cannot deal with self-assessment, or need to speak to a technical officer, often unavailable. Promised callbacks do not materialise.
At the moment I am owed thousands. I rang yesterday to be told that they aim to process my letter of mid-January by July 20, a delay of six months.
I asked to speak to a technical officer, but the response was that the matter required a higher rank to deal with it. This is after being asked to resubmit paper copies of a dozen EIS certificates, despite the spreadsheet entry in my tax return of last autumn.
I believe that I am not alone in this. It is possible that HMRC is sitting on funds of around £1bn on which it pays a rate of interest which is pitiful?
David
Dear David,
You are due these tax repayments because you invest in young growing companies through EIS and SEIS. These tax incentives have been made available by successive governments precisely because, although sometimes risky, they are usually in the high growth businesses of the future on which our economic growth depends.
Rachel Reeves understandably wants growth to help fund public services, but the administrative delays by HMRC that you mention inevitably serve to blunt the incentive to invest.
Although your repayment arises from qualifying EIS investments, it is a wider issue as highlighted in a recent article by Madeleine Ross, which noted that HMRC has stopped processing tax repayments requested by telephone. The problem, as you have discovered, is that claims by post are not being dealt with efficiently either.
The issue you rightly raise is that the scales are weighted heavily in favour of HMRC and against taxpayers.
In the Spring Statement, the Chancellor announced that as of April 6 2025, interest on unpaid tax will be charged at 8.5pc. The Government says that this is part of the package to bring down the balance of unpaid tax and is fair to other taxpayers who pay on time.
This compares with the interest rate paid to taxpayers on repayments due of 3.5pc. I entirely agree with you that it seems unfair to make taxpayers such as yourself wait for six months or more to recover your money while only receiving this return on their money.
On top of this, HMRC will be restarting the direct collection of tax from customers' bank accounts. This process was originally introduced by the previous government in November 2015 but discarded five years later.
I have many concerns about this process, not least the absolute necessity of ensuring that the tax is due. As the Treasury Select Committee said at the time: 'This policy is highly dependent on HMRC's ability to determine accurately which taxpayers owe money and what amounts they owe, an ability not always demonstrated in the past.'
I wrote recently about a case where an entirely innocent lady, Gabrielle O'Donovan, was brought to the brink of bankruptcy when HMRC incompetence meant she was confused with an entirely different person.
As you imply, you are not alone in experiencing this problem.
Other readers tell us that they have also suffered long delays at the hands of HMRC. One said: 'I submitted my tax return in September and the HMRC website by early October showed that [it] owed me my tax refund, but they didn't pay it to me. I wrote but they didn't answer. I wrote again, which went unanswered. In March I phoned, and having waited 45 minutes I eventually got through and the payment was authorised, but with no explanation for the hold up.'
Another reader said: 'I submitted my return in mid-July showing a reclaim. I chased the repayment and, after an hour on the phone, eventually got through to someone who said the repayment needed a 'security review', but couldn't say what tasks were involved. I infer that 'security review' is probably just a new excuse they have invented to justify delays and likely doesn't relate to security at all. The repayment arrived in mid-October.'
HMRC says that such reviews are to protect against fraud. It is clearly right for HMRC to guard against fraudulent claims, but I am not sure why this should take so long to process. Claims for tax relief are made on EIS 3 certificates only issued by the company, but only after following the HMRC clearance procedure. In addition, by far the majority of EIS investments are made through wealth managers who will have carried out their own review.
The issue of slow tax repayments is much wider than just those seeking repayments on EIS investments. Esther Shaw recently wrote a summary of the most common reasons for tax overpayments, together with some useful tips for speeding up the process.
The Association of Taxation Technicians (ATT) has been working with HMRC in an attempt to improve the position. It suggests avoiding human intervention where possible by filing returns online. According to HMRC, tax repayments should then be processed within 10 days. Claims made using R40 paper forms inevitably take longer.
The ATT also advises against submitting voluntary returns, and suggests requesting a notice to file from HMRC. It is also important to complete the bank details on page TR6 of the return to avoid banking delays.
The Low Incomes Tax Reform Group (LITRG) carries out an important support function for unrepresented taxpayers. Its guidance notes that a four-year deadline exists for claiming back overpaid tax. However, if you miss the deadline, you may still be able to obtain a repayment through Extra Statutory Concession B41 if there has been an error by a government department, as explained in the HMRC manuals at SACM10040.
Mike Warburton was previously a tax director with accountants Grant Thornton and is now retired. His columns should not be taken as advice, or as a personal recommendation, but as a starting point for readers to undertake their own further research.