Does HMRC consider you to be sufficiently ‘credible’ to receive your tax repayment?

We all need to be vigilant these days in the face of never-ending and increasingly creative ways to dupe the innocent and unsuspecting public into parting with their money and personal data. HMRC can also be a target for such scams. Repayments of tax arising from income tax self-assessment returns are a case in point. As self-assessment is based on a ‘process now, check later’ system HMRC imposes verification and checking safeguards at the repayment stage to weed out fraudsters from genuine claimants before repayments are made.

Whilst the verification approach is commendable in principle, if it is to be a practical tool then it must be used in a way proportionate to the perceived risk. Recent evidence suggests that this is not necessarily the case.    

One of the HMRC teams tasked with this role sits within Individual and Small Business Compliance (ISBC) and in correspondence titles itself as ‘Complex and Agents, ISBC Direct Tax Repayment Credibility’. Recent letters sent by this team contain information and document requests which raise the question of exactly where HMRC consider the bar of ‘reasonable’ sits in the context of these verification checks, as the letter includes requests for details such as:

• Proof of ID: passport, driving licence or birth certificate
• Proof of address: copies of a recent utility bills or the equivalent
• Copies of P60s / P45s
• Confirmation that proof of expense claims is held: invoices, receipts etc

Additionally, it requests:

• A copy of a recent bank statement
• The completion of a three-page repayment questionnaire, including details of agent’s fees,
• A completed form R38 repayment claim including the recipients bank details.

If the individual is within the Construction Industry Scheme (CIS), further details have to be supplied.

Although the HMRC letter confirms that it is not an enquiry into the tax return itself, the level of detail requested to verify what can be relatively small claims does seem excessive, particularly when it only allows 30 days to comply. If there is no response, HMRC will remove the individual from the self-assessment regime, an action which in itself could trigger a host of other problems for the hapless taxpayer.