HMRC now overriding SA bank repayment details on tax returns

HMRC now overriding SA bank repayment details...

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Received two tax refund notifications for husband and wife through the post today and was surprised to note that the refunds were being sent to "the debit or credit card last used to pay their Self Assessment Statement".  This is despite their bank details being given on the tax return form for repayment purposes!!!

I rang the Agents Helpline and they said this was a new initiative - having said that the person I spoke to was very sympathetic and could understand my concerns that clients express instructions on the tax return were effectively being ignored.

I wonder what would have happened if the refund had been mandated to us by the client?

Some of the things HMRC do just beggar belief - do they not even think about consulting people first?  If this is part their digital tax plan then count me out.

Replies (35)

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By Tim Vane
27th Nov 2015 15:14

Well, it might be a sensible measure to take given the amount of repayment fraud that seems to be happening, but it would be nice to be kept in the loop!

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By gilbob
27th Nov 2015 15:27

By way of an update I have just spoken to the husband and he confirms both the repayments have been made as described in my earlier post.

What is perhaps concerning is that the refunds both ended up in the husbands bank account because the last time tax was paid by debit card he paid both liabilities.  However what if the couple had now split up?

I think this is an extremely dangerous policy if HMRC persist with it.

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By Andp
27th Nov 2015 16:16

That really is shocking that HMRC has done that. Refunding a credit card ?

Furthermore -Watch out for advanced payments of SMP funding 

A client provided bank details for the credit £5500 to be paid into and HMRC still sent him x 2 cheques

one for 15/16 and one for 16/17 ! Then the postman delivers them to his neighbour -   friendly neighbour fortunately 

maybe HMRC systems are down currently not allowing direct bank transfers ? Seen nout on the website to this effect 

What else can we expect before February !!!!!

 

 

 

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By johngroganjga
28th Nov 2015 15:40

Refunding the card is standard anti fraud procedure, that HMRC in my opinion are right to apply like every other supplier does. You try buying goods with a credit card from a high street retailer and then trying to get your refund in cash when you return the goods.

What is objectionable is that HMRC don't give notice of the policy they follow. In the section of the return where you enter details of where you want the repayment sent they should flag up that where payment has been made by card the details you enter wil be ignored.

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Replying to Anonymous.:
RLI
By lionofludesch
28th Nov 2015 17:15

I disagree

johngroganjga wrote:
Refunding the card is standard anti fraud procedure, that HMRC in my opinion are right to apply like every other supplier does. You try buying goods with a credit card from a high street retailer and then trying to get your refund in cash when you return the goods. What is objectionable is that HMRC don't give notice of the policy they follow. In the section of the return where you enter details of where you want the repayment sent they should flag up that where payment has been made by card the details you enter wil be ignored.

I disagree.  HMRC is NOT a supplier.

This isn't the normal high street situation where you take the goods back and get a refund.  These repayments could, in theory, at least, be many times the monthly payment top the credit card company.  How is the taxpayer expected to turn that into usable funds ?

And who benefits from the credit card surcharge refund ?   HMRC ?   Or is that refunded to the taxpayer ?

Let me guess ........

 

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By Cloudcounter
28th Nov 2015 15:54

HMRC made an announcement about this a few weeks back.  They have been advised that it is best practice on card payments to make any refund to that card, as John above has pointed out.

It seems that this is a fairly recent change, and possibly made after the design for the 2015 return was finlaised

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James Reeves
By James Reeves
28th Nov 2015 16:10

This has been HMRC policy for a while. The latest version of 2015 SA100 form has the following text above the repayment section (my emphasis in bold):

To claim a repayment, fill in boxes 4 to 14 below. If you paid your tax by credit or debit card, we will always try to repay back to your card first before making any repayment as requested by you below. Please allow up to 4 weeks for any repayment to reach you before contacting HMRC.

EDIT - Note that this is NOT the same version of the form that was originally released to software developers last year so some commercial software does not have the additional text. It IS on the draft 2016 form so will be in all commercial software for 2016.

I don't recall this text appearing on the repayment details of the HMRC online software either, so perhaps only those completing a paper form will be aware of it. Perhaps the addition of this text on the online software is something that HMRC will address with the annual update in April.

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By Marion Hayes
28th Nov 2015 16:24

Good practice in my opinion

John is right - refunds to card used ( if still valid ) has been standard practice for all the online retailers I use for many years. I thought I had been told it was part of the conditions of the card service back then.

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By johngroganjga
28th Nov 2015 17:43

I used supplier (for convenience) in the sense of someone who members of the public pay money to.

The fraud that the HMRC system prevents is someone using a stolen debit card to make a payment of tax in excess of what is due then obtaining the repayment themselves.

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RLI
By lionofludesch
28th Nov 2015 17:50

Debit card

I don't have a big problem with a debit card linked to a current account.

Credit cards are an entirely different matter.

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By johngroganjga
28th Nov 2015 17:59

The fraud risk is identical whichever kind of card it is. Not sure why you see it in one but not the other.

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Stepurhan
By stepurhan
28th Nov 2015 19:28

Credit card problem

Because a refund to a credit card is not available funds to the taxpayer. If I only use a credit card to pay my tax bill, then a refund to that card is no good to me. At best it is an extra delay in getting the money, as you would have to request a repayment from the credit card company.

That is even before considering if such a thing is possible (anyone have practical experience of that) or whether there would a charge for getting the money back.

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Replying to Paul Crowley:
RLI
By lionofludesch
29th Nov 2015 18:04

Quite

stepurhan wrote:

Because a refund to a credit card is not available funds to the taxpayer. If I only use a credit card to pay my tax bill, then a refund to that card is no good to me. At best it is an extra delay in getting the money, as you would have to request a repayment from the credit card company.

That is even before considering if such a thing is possible (anyone have practical experience of that) or whether there would a charge for getting the money back.

Exactly.

It's worth pointing out that, with a conventional high street refund, the refund won't exceed the amount leaving the account.   A self assessment refund could be thousands of pounds more than the original payments.  It's just not appropriate to send it to a credit card - fraud prevention or not.

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By The Innkeeper
29th Nov 2015 11:50

Fees?

And what happens if Mr (or Mrs) Client is happy for the refund to be used for outstanding fees ?If it goes to the client I can see the profession having to struggle to get paid in these circumstances.

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By adam.arca
29th Nov 2015 12:43

Couple of points
I agree with Lion that refunding say £7k of tax is a completely different story than £15.99 from B&Q, and that shouldn't be going to a credit card regardless of what industry best practice may be (which wasn't devised with this scenario in mind anyway). By analogy, I would also personally say that nor should a refund automatically go back to a debit card. The Revenue therefore, as usual, are guilty of not thinking matters through and then seeking to blame someone else.

The other issue, though, is the lack of communication. We've all got used to the Revenue slipping changes through on page 87 of something obscure so I suppose that announcement was business as usual for them, but in this case the Revenue's point of communication is the tax return and what we all see printed in front of our face. If this change of policy isn't on those tax returns, which it isn't, and if those tax returns are valid, which they are until at least 31 Jan, then it really ought to follow that any change of policy should have waited until after that date (or, even better, the start of the next tax year).

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By johngroganjga
29th Nov 2015 13:31

I think that some people are not understanding the fraud prevention reason that is behind HMRC's change. Would those who disapprove of the new practice (as distinct from any failure to announce it properly) care to explain whether that is because they think fraud prevention is not part of HMRC's role, or because there is a better way of preventing it, or because the inconvenience caused to honest taxpayers is not worth the benefit of preventing the activities of the crooks?

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By adam.arca
29th Nov 2015 16:47

Whilst...
...fraud prevention is clearly important and the Revenue should certainly do what they reasonably can to prevent it, that doesn't explain why this change has been introduced now and without any decent form of heads up either: if the Revenue's previous policy of repaying to the details specified in the tax return has been good enough for the last x years where fraud has been an issue, then they would equally have been good enough for the next 4 months until people could be properly told what the policy is via next year's tax return.

So, yes, I do think that inconveniencing the honest majority to only possibly inconvenience and certainly not stop the fraudulent minority is not a good reason for a change. Would we all change to driving on the right just to suit the rest of Europe? No, of course we wouldn't and it's really about time that the Revenue and other numpties (incl in the private sector) stopped insisting we use online systems which are clearly not fit for purpose, then make them very difficult to use by hedging them around with all sorts of "safeguards" which just make life difficult, the exact opposite of what we're told they're trying to achieve.

Plus, on a purely practical level, why is it right to refund a credit card which may only have been used to pay the last £500 of tax owing after the previous £5k had been paid by cheque? Or, what about the scenario where the completely skint taxpayer has persuaded his best mate or his parents to pay on their credit cards just to get the Revenue off his back?

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Replying to scalloway:
RLI
By lionofludesch
29th Nov 2015 18:08

Great post

adam.arca wrote:
...fraud prevention is clearly important and the Revenue should certainly do what they reasonably can to prevent it, that doesn't explain why this change has been introduced now and without any decent form of heads up either: if the Revenue's previous policy of repaying to the details specified in the tax return has been good enough for the last x years where fraud has been an issue, then they would equally have been good enough for the next 4 months until people could be properly told what the policy is via next year's tax return. So, yes, I do think that inconveniencing the honest majority to only possibly inconvenience and certainly not stop the fraudulent minority is not a good reason for a change. Would we all change to driving on the right just to suit the rest of Europe? No, of course we wouldn't and it's really about time that the Revenue and other numpties (incl in the private sector) stopped insisting we use online systems which are clearly not fit for purpose, then make them very difficult to use by hedging them around with all sorts of "safeguards" which just make life difficult, the exact opposite of what we're told they're trying to achieve. Plus, on a purely practical level, why is it right to refund a credit card which may only have been used to pay the last £500 of tax owing after the previous £5k had been paid by cheque? Or, what about the scenario where the completely skint taxpayer has persuaded his best mate or his parents to pay on their credit cards just to get the Revenue off his back?

Hear, hear.  What a great point that, due to the undue pressure placed on skint taxpayers by HMRC, they may actually be refunding the wrong person.

Who will be putting that right ?   Can we expect a Gallic shrug from HMRC ?

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By johngroganjga
29th Nov 2015 18:17

It's a matter of judgement whether the occasional inconvenience to the innocent taxpayer is worth the advantage brought to those whom the system protects from a particular kind of fraud.

I know which I would prefer if a crook had got access to my HMRC account and my debit card details, but accept that there are some who feel that the baby has been thrown out with the bath water.

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David Winch
By David Winch
29th Nov 2015 18:24

Just a thought

Is the agent in a position to direct the refund to a specific bank account held by the taxpayer (using sort code & account number) by logging in to HMRC system & 'manually' triggering the refund?

I appreciate that this may not be 'the answer' for all sorts of reasons.  Also I appreciate that an agent who used the system to direct the refund to a bank account which he (the agent) controlled could be accused of theft.

David

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By Marion Hayes
30th Nov 2015 08:36

Own name

When paying by credit card retailers always ask for the exact name on the card.

I would assume without authorisation a refund could not be issued to a different name so  payment to a third party should not happen.

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By gilbob
30th Nov 2015 09:19

Wife's tax refund went to hubby

In the case that I originally highlighted the wife's tax refund went to the husband's bank account.

Just because he paid a tax bill for her at some point in the past does not make this correct.  How does this sit with the principal of taxpayers being treated separately for tax purposes?

 

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By johngroganjga
30th Nov 2015 09:33

Again - it's anti-fraud protection.

In your example, if the spouses were estranged, and the wife paid her tax out of the husband's account unlawfully and without his approval, the repayment going back into his account would protect him against her wrongdoing and stop her dishonest scheme in its tracks.

So in those circumstances it would be a good thing, and you would no doubt applaud HMRC for their rigorous attention to detail. If however the circumstances are innocent, as I am sure they were in your case, then you may have an inconvenience for innocent taxpayers, which you may think is too high a price to pay just to forestall a handful of criminal schemes.  That is a perfectly reasonable opinion to hold.

As an aside, I would have thought that the procedure of refunding only the card would apply only up to the amount previously paid by card.   

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By SteveHa
30th Nov 2015 10:02

Occasional inconvenience? Take the scenario that the last card payment of tax was made by a spouse, amounted to £100, and occurred prior to a very acrimonious divorce. Said spouse has now emigrated and you have no idea where to.

Now, refund of £8,000 due for a later year, repaid to card (without authority, I might add, since HMRC have taken it upon themselves to ignore the Return entries).

Result. One very unhappy taxpayer, and one elated former spouse.

Hardly just an inconvenience.

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By johngroganjga
30th Nov 2015 10:10

I can't speak for how exactly HMRC apply the policy, but I would have thought that in those circumstances none of the £8,000 repayment would be repaid to the card, as none of the tax overpaid had been paid on it.  I imagine the policy is, or should be, specific to the original source of the actual money been repaid.

 

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By SteveHa
30th Nov 2015 10:24

Whilst I agree in principal, to quote from the original post, "the debit or credit card last used to pay their Self Assessment Statement". This doesn't suggest that due consideration is being given to the source of payment of funds now being refunded, but merely suggests that if you have ever used a card to pay, they will refund to that card.

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By Mr_Flibble2
30th Nov 2015 10:47

The cynic in me wonders...

If this fraud-prevention method couldn't simply be used to perpetrate fraud. 

If someone had access to the UTR of someone they knew would be due a refund, and used a card in their control to make a payment to the relevant SA account, they could engineer a repayment to their card. 

Of course if HMRC's systems are in any way sensible and the procedure that johngroganjga outlined applies this could not happen.   One can only hope - or alternatively test it with some willing participants!!

It is of concern that this procedure effectively overrides the instructions on the return, especially where payment is directed to nominees. 

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Replying to Davidw29:
By johngroganjga
30th Nov 2015 11:10

Criminal

Mr_Flibble2 wrote:

It is of concern that this procedure effectively overrides the instructions on the return, especially where payment is directed to nominees. 

But presumably you wouldn't be concerned if the instructions over-ridden were placed there by a third party with criminal intent. Quite right too would probably be your view then.

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Replying to SWAccountant:
By SteveHa
30th Nov 2015 11:16

How would that work?

johngroganjga wrote:

But presumably you wouldn't be concerned if the instructions over-ridden were placed there by a third party with criminal intent. Quite right too would probably be your view then.

And how exactly does someone go about fraudulently making entries on a Tax Return prepared by a reputable agent?

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By johngroganjga
30th Nov 2015 10:55

That doesn't work if the refund to the card is limited to the payment made from the card, which we all must hope it is, but who knows?

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Replying to sanjarkhan:
RLI
By lionofludesch
30th Nov 2015 20:17

Just not good enough

johngroganjga wrote:
That doesn't work if the refund to the card is limited to the payment made from the card, which we all must hope it is, but who knows?

So you can only get a repayment of the money you've paid on the card ?   

No CIS ?  No PAYE ?

Here's where the holes start appearing.

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By johngroganjga
30th Nov 2015 11:40

When prepared by a reputable agent, not very easily, but when the taxpayer's HMRC online account has been hacked by crooks, all too easily. It seems to happen a lot according to what people regularly report in this site.  

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By Joe Soap
30th Nov 2015 16:32

How would the fraud work?

If I take it something back to the shop it came from they will (probably) not give me cash for two reasons - one is to do with the credit card charge and the other is that I may not actually be the person who bought it.

If I fill in my tax return, enter my bank details, sign the return and file it how can this end up as a fraud? If this is done by my agent then he might put in his own bank details instead but that is why there are such things as IR marks and so on.

So we are left with the taxpayer's HMRC account being hacked. Do you mean that the HMRC system is not sufficiently secure to prevent this? And that in order to overcome the fact that they have a crap system they put in place something with all the potential dangers that have been outlined above?

Maybe all refunds should be delivered personally by your own tax man?

What is really bad is that there is no proper forum to put this sort of think to HMRC.

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By User deleted
01st Dec 2015 10:13

HMRC guidance

http://www.hmrc.gov.uk/manuals/sammanual/SAM110116.htm

Hopefully this will untwist a few knickers.

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By SteveHa
01st Dec 2015 10:20

Actually, it untwists nothing,

 

"The system will attempt to repay to card in the first instance regardless of any nomination made on the return or structured action request (SAR), including Deeds of Assignment."

meaning that advisers who rely on receipt of the repayment in order to get their fees are now screwed. (Fortunately, I'm not one of them).

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