Thousands of small businesses are suffering financially due to chronic delays in issuing tax refunds this year, the ICPA accounting body has claimed.
Delays in handing out refunds – valuable cashflow for many struggling firms – are so bad that HM Revenue and Customs has been forced to publish an apology to accountants and the clients they represent as part of its regular guidance.
HMRC insists the delays are down to more rigorous security checks, which has resulted in many more self-assessment refund claims being sent for review to a specialist team that has been set up in Bristol.
However, the claims have been rubbished by the ICPA – the membership body representing general practice accountants in the UK.
ICPA chairman Tony Margaritelli said: “Refunds are taking an interminable amount of time. Many accountants are pretty unimpressed by the excuses – the general consensus is that the Government wants to hang on to the money as long as possible and has asked HMRC to drag its feet by delaying payments.
“What is most galling is that HMRC have been encouraging accountants to file self-assessment for clients because refunds are automated and should come through within days. They are sending many more claims for ‘scrutiny’ on a completely random basis.
“Last year the system worked reasonably smoothly, but this year payments that previously would come through in a matter of days are months overdue.”
Mr Margaritelli said the delays also highlighted the potential of fraud in the self-assessment system.
“Everybody understands that there should be checks because the Exchequer shouldn’t give away money willy-nilly. But it is how they have gone about it that is puzzling – are they saying they’ve been lax in the past? It gives everyone the impression that last year HMRC paid significant refunds that weren’t due.”
The issue has been further complicated this year by the fact many more small businesses and sole traders are due refunds, having overpaid when the economy was more buoyant in tax year 2007-08 and then seen their incomes decline in 2008-09.
The knock-on effect is also hitting ICPA members in the pocket.