By Amanda Vigar, Managing Partner, V&A Bell Brown LLP
It is not often that the Battle-Axe’s rolling pin spins on its own without human input, but we have had three incidents this week alone, that have had it dancing a veritable tarantella – and, surprise, surprise, they all involve HMRC!
Case number 1 concerns a small employer. They took on a new employee part way through the 2014/15 tax year. Because of the salary/bonus the employee had received from his previous employer, and the way the PAYE system works, in certain months of his old employment higher rate tax had been deducted from his salary.
Now, across the year as a whole his package (including the new employer’s wages) was below the higher rate threshold. So, the employee was rightfully entitled to a refund of the excess higher rate tax, which was paid back to him via payroll.
Now, if this had been a bigger employer the employee’s refund would probably just have reduced the amount of PAYE to be paid at the year end with no big issue. However, because the business was very small, the refund was actually more than the PAYE due to be paid.
But that’s no big hassle, HMRC just reimburse the employer right?
Well, that’s the concept and we would normally have expected this to happen within a couple of weeks of tax year end payroll returns going to HMRC – so, sometime in April or May. We’re now in August and, despite our active chasing, still no refund. This week we rang again (and after being on hold for 47 minutes) were informed that the repayment would be made in, wait for it, February 2016! Errrr…that’s the employee’s money that the new employer has already repaid (as required) and which HMRC are not entitled to (and actually never have been) being held back for no reason.
This means our client is going to be waiting to get back money that was deducted in relation to a period when the employee was working for someone else for well in excess of 12 months.
In a similar vein, another client had what turns out to be the misfortune to have a key employee go on maternity leave. That’s OK as the reimbursement of statutory maternity pay (SMP) is done by reducing the PAYE payable each month. But again, the SMP was more than the PAYE due so the extra SMP payment needed to be reimbursed by HMRC. Believe it or not, this time, the estimated payment date is March 2016. So here, the employer has lost a key member of staff in a small business for at least nine months, putting added strain onto the business, and has to wait well over a year to be repaid the SMP that they have paid out on behalf of the Government.
In both cases, the amounts involved would be enough to put some small employers into the bankruptcy courts! Of which more in a little while. And remember, the Government is currently talking about pushing big businesses to play fair and pay small businesses more rapidly. Pots and kettles comes to mind…..
Now the pièce de résistance: HMRC’s debt collection system! We’ve long suspected that HMRC have a random number generator that they use to create documents to send to similarly randomly selected companies or individuals. Fortunately, we do monthly book keeping for the third client in this sorry list, so we know that they have paid everything that is due to HMRC. Unsurprisingly therefore, this business owner was horrified to be asked to pay £1,700-plus of arrears. HMRC has confirmed that the overall liability agrees with ours, and the debt collection team can’t explain why or how the claimed arrears have arisen. Better still the online portal that we use to check HMRC balances gives a totally different figure to the amount they’re attempting to collect. When pushed to explain this apparent discrepancy, an HMRC employee actually admitted that “this happens all the time, it would appear that our systems don’t work” – talk about stating the obvious! But at least we now know what dear old ERNIE is doing in its spare time when not picking numbers for the Premium Bonds.
While I would like to think that my clients have just been unlucky, this pattern of HMRC errors (almost always seemingly going in HMRC’s favour if we didn’t pick them up) is growing all the time. Exercising my democratic right I have made my views very clear to the client’s local MPs and to David Gauke - the Minister responsible for HMRC.
Sometimes that institution seems to forget that it is part of Government and therefore exists for the people of this country – not against us!
If you are having similar issues, I would urge you to contact your MP and let them know what has happened. Do feel free to copy the BattleAxe in as we want to monitor both the issues and HMRC’s overall performance. Maybe when they get sack loads of mail and their e-mail boxes are bursting at the seams, they might take things serious.
Oh yes, to bring this sorry tale to and end and very sad to say, we also have seen cases where HMRC has actually petitioned for the winding up of a business based on blatantly wrong information from their systems!
To solve this ridiculous situation I don’t know what my weapon of choice should be –what’s your vote: my rolling pin or a magic wand?