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HMRC sent client's refund to my personal bank account

HMRC sent client's refund to my personal bank...

I have just received a credit in my personal bank a/c for a tax refund due to one of my clients. The only bank details I gave HMRC were the clients & this was on the 2015 ITR. HMRC say that my a/c details were handwritten onto the (late) 2013 ITR but my copy of page 6 is blank. They are going to send me a copy of the page they have but I am quite concerned as to how HMRC have managed to do this as I never ask for client refunds to be sent to me.

Anyone got any clues please? Stop reading '1984'??

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02nd Mar 2016 11:50

Well

 They did say that everyone would have a digital account, and it seems you are the  lucky recipient of the first of many HMRC cock[***] ups. Take the money and run!

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02nd Mar 2016 13:22

@ Diane [OP]

"More than meets the eye" springs readily to mind.

Pending your receiving the promised copy page from HMRC, you must immediately repay HMRC [so as not to be implicated, regardless of the reason for the HMRC error].

Given your assurance that you never receive Tax Repayments from HMRC [receiving them into your "personal" bank account would be in breach of ethical guidelines, irrespective of which governing body you belong to - this is quite apart from possible improper contentions of illegality on your part, hence the need to refund HMRC forthwith as advised above]​ what is unclear is quite how HMRC obtained your personal bank account details - can you put forward any theories ?

To which tax year does the Tax Repayment relate ?

This is a potentially very serious matter, and you should write to the HMRC Complaints department.

Keep accurate records of your time costs and claim compensation from HMRC in due course [notify HMRC in so doing that in the exceptional circumstances of this case, their normal requirement for the fees to be paid by the client and then reimbursed by HMRC do not apply, and payment should be made direct to you - if you are VAT-registered, then no VAT is applicable as there is no supply of services to anyone, merely a claim for HMRC's wasting your time].

In intending no offence, my above comments are based on the assumption that no blame attaches to yourself, or to any staff engaged by you

Basil.

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By DMGbus
02nd Mar 2016 13:38

From what account was the tax paid

If it were to be the case that the client's tax bill was settled by the accountant using a debit  card on behalf of the client then I would expect the refund to go back to the accountant as card-paid tax payments get refunded to the source account nowadays.

I know that this is an unliklely scenario, but mention it as it is the only way that I would have expected a client's tax refund to go to their accountant absent of completion of the relevant section of the tax return.

This leads me to a further possibility - there is reference to handwritten bank details on the relevant section of the tax return - if this happened to be a paper submitted tax return then it is possible that the client themselves added the accountant's bank details to the relevent page on the tax return.

I await with interest to discover actual reason for what has happened.

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02nd Mar 2016 14:12

Not sure why Basil is saying that you should return the money to HMRC. It doesn't belong to them. It belongs to the client on whose behalf you have received it, and it is to the client that you should immediately transfer it.

Also in saying you should claim your costs from HMRC, Basil I think is assuming that their explanation that they made the repayment in accordance with the instruction on the return sent to them turns out to be a lie. It may do of course. I have no idea. But until it does I think talk of claiming compensation for your trouble is premature and over-dramatic.

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02nd Mar 2016 14:12

@ fawltybasil2575

Whilst agreeing with most of what you say, I disagree with your assertion that the OP "must immediately repay HMRC".  The OP should establish whether this refund is indeed due to his client, and if it is then he should pay it to his client, not HMRC. 

He should do so by bank transfer, or some other traceable method, so there is a clear audit trail proving that payment has been made.  Repaying HMRC will simply lead to his client being denied a refund he is legally entitled to for months, possibly years (who knows with HMRC). 

Receiving this refund into his personal bank account does not breach ethical guidelines as he did not request it to be placed there. The only question seems to be – who did. 

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02nd Mar 2016 14:17

.

I would transfer the money to the client and make a note on file about what happened if you are a CA and they start asking questions about handling client monies. 

If this was for some exceptional reason paper-filed it does sound like the client wrote them in, otherwise how else would HMRC have them?  I assume they are PD1 or something and you printed, sent to client to sign and they sent them on, rather than a regular return.

 

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02nd Mar 2016 14:18

You can choose to send a rebate to your 'agent'

When you request a repayment of overpaid personal tax on-line, there is a screen which offers three alternatives for the payment:

(a) to my bank account (b) to another bank account (c) to my agent's bank account

And, even if you have no agent registered but you had an agent registered a some point in the dim and distant past, they helpfully show up in the listing of possible people you could send your rebate to. There does not appear to be anyway of amending this. Not very helpful really.

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02nd Mar 2016 14:50

[1] Immediate Repayment : [2] Compensation

[1] Immediate repayment [major factor].    Until such time as the OP is sure that the amount received into her personal bank account is [i] a valid Tax Repayment and [ii] still payable to the client; and [iii] has not been duplicated [such facts have still to be determined from my reading of the OP's question], then retaining the monies in the personal bank account is fraught with danger.

I accordingly reaffirm the advice in my last post that the monies be immediately returned to the payer - in a case with a number of peculiarities, it is IMHO the only safety-first option.

[2] Compensation [secondary factor].  To be clear, the advice in my last post as to the claim for compensation is based on the reasonable assumption that there are no unknown facts which would explain what, prima facie, represents incorrect HMRC action.   I certainly made no assumptions that any explanation by HMRC was "a lie", merely that it represented an error by HMRC  - the established HMRC redress policy is designed to compensate taxpayers, and often indirectly their agents, for such errors.   

On the facts stated it would be very much in the public interest that HMRC receive a compensation claim, since this will in practice result in their urgently reviewing their procedures - I have extensive experience of the HMRC redress policy, and often the outcome is that "lessons are learnt" within HMRC, to the benefit of all concerned. 

Basil.

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02nd Mar 2016 15:07

Basil

The OP already knows that the amount in question is a refund due to one of her clients, so she does not need to make any further enquiries in that respect.

And no-one is suggesting that it should be left in the OP's personal account for a moment longer than necessary. You are preaching to the converted in that respect. 

Where everyone who has commented parts company with you is your idea that the money should be returned to HMRC, rather than forwarded to the client.  Why should the OP's client be deprived of money that is rightfully theirs, especially by accountants whom they pay to protect their interests?

Regarding error / lie, you confirm my point that you are assuming that HMRC have made an error. You may have a better crystal ball than me, and if you already know what is going to be found written on the tax return page in question you have the advantage over me. If the page does not contain what HMRC says it does, they will have lied to cover up an error they have made. So lie and error are the same thing here.

Yes if HMRC have made an error it would be in the public interest for them to receive a compensation claim. But let's see whether they have made an error first shall we?  

 

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By Diane
02nd Mar 2016 16:18

The money was transferred by me to the client once the situation had been confirmed by HMRC. The refund was not made in error by HMRC it was simply paid into my personal bank a/c rather than into the client's a/c.

The Return (2013) was a paper one as it was (very) late. The client did not know my bank details at the time so could not have entered them on the Return.

I have a copy of the 2013 Return on file - there are no entries on page 6 (the 2015 ITR was filed shortly after the 2013 ITR was posted & it was the 2015 ITR which had the client's bank details on).

I will update when/if I hear from HMRC - they have to email another dept which apparently means this could take 4-6 weeks!

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02nd Mar 2016 16:42

Thank you for the clarification. It is good to know that you have transferred the money to the right place. As a matter of interest, when you say "personal" bank account do you mean personal as opposed to business, or do you mean yours as opposed to your clients?

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By Diane
02nd Mar 2016 17:10

I mean the former - does it matter?

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02nd Mar 2016 17:33

Yes because if you meant the latter it would be less mysterious. I am sure I am not unusual in that all my clients have details of my business bank account - that is how they pay me - and it appears on all my invoices come to that - but none of them know any details of my personal bank account.

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02nd Mar 2016 18:40

@ Diane.

I interpret your words of "The refund was not made in error by HMRC" [your 16.18 post] as meaning that the amount of the refund was correct; and I assume therefrom that it related to 2012/13.

Your confirmation of "the former" [your 17.10 post] [ie, in reply to John's post, the refund was paid into your personal bank account] still leaves unexplained the mystery of why the refund was improperly paid into that personal bank account. 

Your advising, in the first sentence of your 16.18 post, that you have subsequently transferred the refund monies to the client's account, implicit in which is that you have confirmed the refund as being correct, very probably [the implied caveat therein is important - see below] will result in the right outcome in terms of the refund "hitting" ultimately the right recipient [regardless of the continuing unexplained mystery].

Whilst I appreciate that I am swimming against the tide on this thread, may I reaffirm resolutely all the comments in my post at 14.50, on the basis [importantly] of the facts known up to that point.  If, as but one of many possible scenarios, the client had in the meantime notified HMRC that they had sent the refund incorrectly to your bank account, and received a duplicated refund in response to his so notifying HMRC, then potentially HMRC might seek to recover the erroneous payment from you.  I could provide other examples [many will be relieved that I do not !]. 

The central point is that, legally, if and when one establishes that an amount has been received incorrectly [or even if one is not entirely sure that it has been received incorrectly] the safety-first principle is to send it back from whence it came.

Obviously, one should also, to protect the client's interests,  chase HMRC to send the Refund to the client [to cover off John's point about acting in the interests of the client].

Basil.

 

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02nd Mar 2016 22:59

@ fawltybasil2575

fawltybasil2575 wrote:

  If, as but one of many possible scenarios, the client had in the meantime notified HMRC that they had sent the refund incorrectly to your bank account, and received a duplicated refund in response to his so notifying HMRC, then potentially HMRC might seek to recover the erroneous payment from you.  I could provide other examples [many will be relieved that I do not !]. 

 

That would never happen. HMRC's internal systems do not allow for the same refund to be made twice. Their procedure is to reclaim it from you, then (and only then) to refund it to the correct recipient, usually after several months delay. 

If, as in this case, the refund was correct and merely made to the wrong bank account then there is a clear legal obligation on the recipient to immediately pass that money to it's legal owner. Overpaid tax does not belong to HMRC, as they themselves acknowledge by making the refund.. The legal owner is the taxpayer, not HMRC.  

By sending the money back to HMRC in the full knowledge that you were in a position to instead send it to it's rightful owner the taxpayer would have an arguable case for seeking interest and compensation from the OP for denying them access to their money for x months. 

 

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03rd Mar 2016 02:35

@ Black Dog

Firstly, I  disagree that the duplication "would never happen", and indeed I have known it happen [due to failure in "HMRC's internal systems"] !

Secondly, as your extract from my post states, the "duplication" example was "but one of many possible scenarios".

Thirdly, your closing paragraph would only be correct if one were certain that the "rightful owner" were the client [at the point when one was considering whether to make a payment to the client]: however, in the circumstances provided by the OP, one would not be in a position to know this for certain, hence there could be no valid claim against the OP for not paying monies to the client.

The opening words of my first post ["More than meets the eye"] are important. When one is faced with a picture which is far from clear, one must factor in the possibility of other facts coming to light which could affect the "end game" - and that is why a safety-first approach is recommended.  The only rational safety-first approach is to "correct the error", ie "reverse" the payment [frankly. in the vast majority of cases, no adverse consequence would arise from making the payment to the client, but that misses the point].

I must respectfully therefore disagree your views.

Basil.

 

 

 

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03rd Mar 2016 10:37

Basil

The fact that HMRC have sent a refund is sufficient proof that they intend it to go to the client. Similarly the client would be entitled to rely upon that simple fact to claim that it should have been immediately sent to them by the OP.  

You are, of course, entitled to your opinion - but don't assume that because you believe it to be correct it IS correct, it is not. 

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03rd Mar 2016 12:10

@ Black Dog

As regards your opening paragraph, I not disagree either sentence therein - IMHO neither sentence over-rides the opinions which I have expressed thus far re the legal position of the refund and the remedial action required. 

As regards your second paragraph, I do fully respect all the contrary opinions of your goodself and other eminent contributors above.   Forgive me please therefore for not wishing to comment on your closing "don't assume" remark. 

Basil.

 

 

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03rd Mar 2016 14:14

A bit overdramatic chaps!

The story seems to be:

Repayment paid to the wrong account.

Accountant checks refund, determines it is correct, no doubt takes a look at it online to see if it is a duplication.

Accountant transfers money pdq to the client.

Accountant asks HMRC 'how did this happen'?

HMRC provide copy of the elusive page, mystery either solved or not.

If not, then agent says 'how bizarre' a couple of times and moves on.

It never happens again.

The End

No taxpayers, agents or HMRC officials were hurt in the making of this post.

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03rd Mar 2016 17:02

I agree with your sentiment entirely except that I am not sure that "chaps" should be in the plural.

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