Please HMRC, may we have our tax back?

29 November 2016

Rebecca Reading

During the Autumn Statement last week, Mr Hammond shared his dilemma about fiscal stimulus: should he cut taxes or borrow to increase public spending?

He chose the latter. Tax cuts were very much off the agenda with no Osbornite big giveaway.

It is understandable that the government gives the impression that the tax HMRC collects is always less than what it expects to get. But there are plenty of cases where tax is due back to businesses and individuals, and releasing this overpaid tax back into the economy would be a simple way to create a fiscal stimulus. HMRC should speed up the issuing of tax repayments genuinely due.

In its annual report (July 2016), HMRC states that ‘repayments are a necessary part of tax administration’, and we agree. The issue is that HMRC’s custom and practice is to drag out the issuing of repayments based on their own internal parameters, which may or may not have a basis in law.

In its explanation of why repayments arise, HMRC refers to taxes being formally assessed. Major tax regimes, including income tax and corporation tax, have operated on a self-assessed basis for many years but in practice, our experience is that HMRC finds reasons to hold on to repayments rather than release the money.

The underlying amounts due back will in many cases be relatively small, although meaningful to the individuals involved. At the other extreme, the amounts at stake in the FII Group Litigation Order, a long-running dispute running through the European courts and back, are substantial and growing as the decades go by as the taxpayers keep winning on key issues – the latest last week - whilst HMRC keep appealing. If there were some way to resolve this case before its reputation surpasses that of Jarndyce v Jarndyce, that would surely be a good outcome and potentially create a fiscal stimulus.

For more information please get in touch with Rebecca Reading, or your usual RSM contact.

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