HMRC under fire for 'overly complex' tax refunds

HMRC under fire for 'overly complex' tax refunds

The taxman has been accused of making refunds linked to its controversial loan charge "overly complex" as peers warned "far too many shortcomings" still exist in its handling of cases. 

HM Revenue & Customs has once again come under fire for the way in which it has implemented reforms to the loan charge, including refunding taxpayers who now fall outside the scope of the charge but have already made voluntary restitution payments to the taxman. 

In a critical letter published last month the House of Lords Economic Affairs Finance Bill sub-committee said whilst HMRC had made progress, there were "far too many shortcomings" in its handling of the issue.

In his letter Lord Bridges of Headley, chairman of the Finance Bill sub-committee, said the process for refunding voluntary restitution payments should be reformed, with the current process "too complicated, both in the claims process and the arbitrary time limits".

The criticism comes more than a year after an independent review conducted by Sir Amyas Morse found the tax bill had gone "too far" and recommended a series of reforms to ensure "fairer treatment" of those affected. 

Bridges of Headley said: "HMRC should be clearer about the process for obtaining refunds of voluntary restitution payments, and should more generally improve communications and seek to reduce complexity – for example, by providing pre-populated claim forms."

He also suggested the government extend the time allowed to claim a refund to December 31, 2021.

Noel Mooney, associate director of tax investigations at RSM, said some taxpayers who reached a settlement with HMRC in "good faith to avoid incurring the loan charge under the original legislation" were now due, in some cases substantial, repayments following the Morse recommendations.

Mooney said: "It would seem, in principle, to be a simple enough exercise for HMRC to review historic settlements, apply the Morse criteria and make repayment.

"However, HMRC has chosen to make the repayment process overly complex, involving several steps to even obtain an application form let alone process the resultant claim.

"Presumably it is hoped some people will give up at the first hurdle." 

In response to Bridges of Headley's letter a government spokesperson noted HMRC had already reported on the action it had taken to implement all of the nineteen accepted recommendations in the Morse Review. 

HMRC told FTAdviser it would write to anyone they believed was due a refund, but anyone could request an application form via phone or email. 

A spokesperson said: “We have made every effort to minimise the complexity of the forms and documents which the customer needs to complete to apply for a refund, and to ensure the information contained is as easy to understand as possible.

"Certain steps must be followed, as it is important that we have all of the required information and that our customers understand the implications of applying for a refund of tax and NICs paid voluntarily.”


The loan charge relates to people who worked and received their remuneration through loans, which are not taxable, rather than a salary, which is. The loans were never intended to be repaid resulting in the tax office treating them as tax avoidance, although the loans were legal at the time.