HMRC computer says no...

HMRC enhanced its repayment security processes with the introduction of verification and identity checks in cases where HMRC perceive there to be a risk before processing repayment claims. The new checks were the subject of concerns for many advisers as they implied, without any explanation, there may be an issue with claims they had submitted and gave the ultimate threat of removing the taxpayers from the SA system in the absence of a response. Assurances were sought from HMRC via professional bodies and HMRC explained that the letters were triggered where risk factors were identified but acknowledged that genuine claims may also trigger risk indicators. What the ‘risk indicators’ were was never made clear.

While the intention was laudable, the identification of claims and the operation and execution of the process fell short in several areas. Anecdotal evidence suggests case selection was haphazard at best. The responses had to be in writing. There was frequently more than one exchange of correspondence and HMRC delays meant frustration before valid repayments were finally made.  

A recent check letter issued by the same HMRC team suggests HMRC may be accelerating the use of what was previously the action of last resort. The removal of a taxpayer from the SA system at the outset of an identity check before establishing whether the perceived risk is valid, is a worrying and controversial step.

The check letter advised that following recent contact with HMRC regarding amendments to the individuals SA record, as part of its security procedures HMRC had removed the Unique Taxpayer Reference (UTR) number from the SA system and it was no longer valid, and as a result the SA record was suspended. It continues to advise that the recipient must respond to the letter in writing and supply the requested ID details for verification before HMRC will progress the matter, including the issue of a new UTR and reinstatement of the SA record. In this case, the only contact with HMRC was to notify two changes of address and there was no repayment claim. 

This approach from HMRC could cause a host of issues, in addition to those previously encountered, including the inability to report liabilities and the resultant interest and penalty implications where the taxpayer is not an annual repayment case. And the well documented HMRC service issues and lack of resource and significant delays in processing or replying to correspondence would also be a cause for concern.

Maybe it is time for HMRC to listen to feedback and provide more clarity on its latest approach in this area.