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HELP! At my wits end..........with HMRC

HELP! At my wits end..........with HMRC

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Folks, I can honestly say this matter is driving me out of the profession!

My client company is a subcontractor. They suffer 20% CIS deductions. Up to 31 March 2013 (covering from April 2012), they have a VAT liability of £200k approx (for 4 quarters). The P35 return submitted in May for 2012/13 shows a refund due of £150k approx due to CIS deductions. The company has been hit with £30k of VAT surcharges due to non payment of VAT each quarter. The reason the company cannot pay the VAT is because of the CIS tax suffered. This is simply ridiculous!

This post doesn't get anywhere near reflecting the HOURS I have spent on the phone with HMRC, with no real progress. The debt management team in Edinburgh simply see £200k of VAT owing and they have proceeded to the High Court for winding up proceedings. They acknowledge a PAYE/CIS refund due but they proceed with a legal case anyway. Fair enough, the company will owe a balance, but my main gripe is that HMRC PAYE in Newcastle are taking 4 MONTHS to process the P35, to agree and authorise the refund, to get "security checks" done and then rellocate to the VAT debt. In the meantime, my client incurs accountancy fees and possible court costs with the winding up order. And of course, no time to pay arrangement will be discussed until the PAYE/CIS refund is reallocated so again HMRC are the problem!

Furthermore, for 2013/14, we have filed CIS deduction info using EPS via RTI. HMRC have now issued a statement of liabilities for the PAYE and NIC due for 3 months with no account given for the CIS deductions suffered. HMRC are demanding £13k were the client is actually owed a £38k refund!!!!!!  Their VAT bill for the first quarter is £35k so the refund would cover this, but no doubt a surcharge will be applied - NOT HAPPY.

I spoke to HMRC today and they need to check their system to see why the haven't allocated the CIS deductions info filed on EPS reports via RTI. They can see the details but they haven't been allocated (are their untrained monkeys at work here?????

HMRC also noted that for 2013-14, any refund of PAYE/CIS due will not be issued or reallocated until after the end of the tax year. So my client faces the same predicament!!!!

What can we do for this client in terms of:

  1. Getting the surcharges waived in the past and in the future
  2. Ensuring CIS deductions incurred monthly are processed properly by HMRC and reallocated to VAT debt (or do I go to Newcastle myself and key this info in to their "System" myself)
  3. Getting to talk to the right people in HMRC about this, not just random staff at Debt Management or Employers Helpline
  4. Complaining to the highest level of authority within HMRC about the handling of this company's tax affairs by their inefficient, ineffective and inadequate systems

Sorry if this sounds like a complete rant, but I guess it is exactly that!  All help greatly appreciated.

Replies (42)

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Chris M
By mr. mischief
28th Aug 2013 12:28

full sympathies

I can't think of anything more you can do, sorry.  I have clients in exactly the same boat - without the surcharges as they have funds for the VAT - for lower amounts.

Isn't it time the whole profession rose up in arms about the cynical way HMRC routinely slow pays CIS refunds?

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Replying to Ruddles:
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By Siany
06th Sep 2013 19:26

YES!

Yes Yes and YES!  this can't continue, HMRC are biting the hand that feeds it.  Would  you all be agreeable to file a report?  This simply can't go on any more.  I too feel like packing it all in, I've paid fines out of my own money to halt client anxiety, who in all fairness to them must think it's in the hand of the accountants!  When you get through to them (if you do)  it's directed to another number which doesn't answer.  I'm sick of it, completely sick.  What happened to "working together"?  Also, have you seen the report about record income for HMRC fines, penalties etc?   they are putting themselves above the law, which can only be challenged by us!

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Chris M
By mr. mischief
28th Aug 2013 12:32

on offsets

It really annoys me when you get the jobsowrthy attitude on assigning credits on one tax against monies due on another, normally VAT.

Because of course, with the boot on the other foot, when you are in a potential insolvency situation HMRC suddenly becomes super-efficient at adding up the consolidated amount and going after it.

I think this sort of commercial cynicism which is rife within HMRC needs stamped out, it was not there in my view when I qualified in 1990.  Then you could at least trust they'd deal with you with honesty and integrity, now those qualities have both been binned.  And has it improved perfomance and results of the tax take?

You're 'avin' a laugh!

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By The Innkeeper
28th Aug 2013 12:45

Two thoughts chaps (& chapesses)

Firstly try writing to your MP ( copy HMRC) and also the MP for the client or the one for the r/o. Secondly  what about issuing proceedings against HMRC for the CIS refund?

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By stratty
28th Aug 2013 12:52

Gross Status CIS

Not a massive help at the moment but to aid with the future position apply for Gross Payment Certificate on CIS scheme.  

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By Roland195
28th Aug 2013 12:54

Gross Payment

Why does the company not have a gross payment certificate? Or this a catch 22 where the alleged strikes in it's compliance history are preventing it from getting one?  This will likely have a bearing on the outcome of your appeals against the surcharges etc.

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By anony scot
28th Aug 2013 13:16

No sympathy

Why has the client not paid the vat - presumably they have collected the money in? The legislation does not allow for a setoff, even although common sense says it should happen - this is more about cashflow management - as noted above, why no gross payment cert - late with filings, per chance?

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Replying to Ruddles:
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By Old Greying Accountant
28th Aug 2013 14:28

Get in the real world ...

anony scot wrote:

Why has the client not paid the vat - presumably they have collected the money in? The legislation does not allow for a setoff, even although common sense says it should happen - this is more about cashflow management - as noted above, why no gross payment cert - late with filings, per chance?

Subcontractors need paying monthly (possibly weekly) as do trade accounts - customers in the building trade have a tendancy to be 90+ days paying, less retentions - regardless of the contract terms. Retentions can take 12-18 months to recover, if you are lucky and they get paid at all. Many big contractors have a habit of taking a 5% discount, as it is "trade practice"!

Anony scot wouldn't work in Cumbernauld would they, sounds like the sort of trite remark HMRC come out with. You could say why have HMRC not repaid the CIS, presumably they have collected the money in - one rule for them ...

As said above, if you don't pay your tax on time you won't get gross status, even though HMRC are the cause of non payment.

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By dreamcatcher
28th Aug 2013 13:29

I do have every sympathy

with sparky999 as the accountant. 

We as accountants are put in the position of trying to do the very best for our clients and we are time again left in the incompetent hands of HMRC's staff who are more often than not utterly clueless.  Then we are left with a p***ed off client and a load of unrecoverable time.

HMRC need to get there act to together on this.  They are only too quick to chase for unpaid taxes, but when it comes to repaying taxes (CIS in particular) it is subjected to security checks.  Does anyone know what these security checks are, HMRC don't seem to and why do they take up to 8 weeks? 

 

 

 

 

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RLI
By lionofludesch
28th Aug 2013 13:46

Liquidation

Had a client go into liquidation over this very point in the winter.  Well done HMRC !! Hope you're proud of yourselves. A great contribution to job creation in the UK.  Fortunately, I wasn't owed much.......... could be worse.

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By KPEM online
28th Aug 2013 14:04

@Roland195 - yes it is catch 22 situation with no way of getting gross status if this escapade continues under the current legislation.

@anony scot - thanks for your contribution, but how can they pay over 20% VAT if they are losing 20% CIS at source?  this is a labour intensive business so inputs for VAT are much lower than outputs.

Thanks to everyone else so far - think it is a case of talking to local MP and perhaps suing HMRC for non payment of CIS refund due to be honest. would love to get this type of thing made national news!!!!

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RLI
By lionofludesch
28th Aug 2013 14:23

Just generally ....

I think it's a disgrace that HMRC won't accept late payment from the Government (be that national or local) as a reasonable excuse.  Trotting our the old "the Government always pays late - you shouldn't expect anything else" argument reveals them to be what I've always thought them to be - bullies.

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By bernard michael
28th Aug 2013 14:41

I assume you've given this to a solicitor as HMRC have issued a WUP. I'm not sure of the procedure where the petitioning creditor is also a contra debtor as in this case but it makes sense that it is a reason for adjournment at least

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Chris M
By mr. mischief
28th Aug 2013 15:08

On security checks

My approach to this is to ask:

"Could you please tell me exactly what you are checking, I can probably help you to sort out some of them?"

You know what, 90% of the time they then agree then and there to release the funds - admittedly mostly on SA, and we all know how awful HMRC are about CIS.  But worth a try.

In my view, these checks are just slow pay pure and simple.  "The check is in the post", as it were.

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By brianheg
28th Aug 2013 16:41

Get help from an insolvency practitioner immediately

If it's got to the Winding Up Petition stage, there is a very real risk of insolvency and the bank freezing the bank account resulting in the doors closing. In a situation like this you should get an IP involved to advise on the best course of action, ideally at an earlier stage as there will be options available.

It might still be possible for an IP to persuade HMRC to withdraw the WUP or agree not to advertise it to buy enough time to come up with a rescue mechanism before the date of the Court hearing.

If HMRC are likely to drive a company into liquidation, the directors may as well be in the driving seat and trying to rescue the business whether it turns out to be via an informal arrangement with creditors, or a formal insolvency appointment such as a CVA, While insolvency procedures and IPs generally get a bad press, they do provide a mechanism to take control before a creditor issues a Winding Up Petition and the bank freezes the account. 

Why should you be tearing your hair out, getting stressed and spending endless hours working at the risk of not getting paid when you can hand the problem to someone else who specialises in this type of situation?

Your client could also contest the winding up petition as a winding up order should not be made on a disputed debt. Note that they will need to pay or provide security in relation to all of the undisputed portion of HMRC's claimed outstanding debt, and provide evidence to support their dispute of the remaining balance. You can also ask for the petition to be withdrawn on the disputed debt and/or apply to the Court to restrain advertisement of the petition on the basis that the debt is disputed. This is important, as it is the advertisement of the petition which would trigger the Company's bank taking action to freeze the accounts. Again, specialist advice should be sought ideally from a lawyer experienced in insolvency cases.

Good luck!

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Replying to Mr_awol:
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By Old Greying Accountant
28th Aug 2013 20:39

Agree with this ...

brianheg wrote:

Get help from an insolvency practitioner immediately

If it's got to the Winding Up Petition stage, there is a very real risk of insolvency and the bank freezing the bank account resulting in the doors closing. In a situation like this you should get an IP involved to advise on the best course of action, ideally at an earlier stage as there will be options available.

... if you are West London area I can give you a couple of names.

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By ccassociates
28th Aug 2013 17:01

Go to court

I went to court on one of these years ago, though it was a sole trader and the amount was only £8k. once I proved to the judge that HMRC owed my client money which HMRC agreed he kicked the case out and awarded my client costs.

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Replying to johnjenkins:
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By brianheg
28th Aug 2013 17:09

That won't necessarily work

ccassociates wrote:

I went to court on one of these years ago, though it was a sole trader and the amount was only £8k. once I proved to the judge that HMRC owed my client money which HMRC agreed he kicked the case out and awarded my client costs.

The Court could still make a winding up order on the undisputed portion of the debt, particularly with a larger debt. Better to pay the undisputed portion (if possible) and provide evidence of a dispute on the remainder. Also, the company can be effectively wiped out before the hearing if the petition is advertised and the bank freezes the accounts.

 

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By bigmuggsy
28th Aug 2013 20:17

Complete and utter sympathy
Complete sympathy with you and your client, CIS and limited companies are a complete an utter joke. See my post regarding my frustrations (though our client wasn't in the predicament of yours).

http://m.accountingweb.co.uk/anyanswers/question/joke-cis-tax-and-limite...

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Man of Kent
By Kent accountant
28th Aug 2013 21:16

Deja vu
@sparky999 - I have a client owed £175k in CIS from 2012/13. Fortunately the company now has gross status.

I've been chasing repayment since May and have been told to expect repayment in October!

I have managed to defer vat and have spoken to HMRC to offset this years PAYE/CIS against amounts owed.

I've also spoken to Vat and have got a time to pay arrangement in place - judging by your comment regarding surcharges this wont be available to you.

I have been told the only way to possibly get a quicker repayment of the CIS debt is to submit a claim for financial hardship and send it to Longbenton.

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By DMGbus
28th Aug 2013 21:52

NOT working together / AU7 / AU36 and before

http://www.hmrc.gov.uk/agents/update37.pdf

Under the ineffectual forum heading of "Working Together" Agent Update 37 August-September 2013 carries an update on HMRC's approach to CIS P35 repayments.

Here's quote on this very serious ongoing problem:

We aim to review claims within 15 days of receipt. However, this is not always possible during peak times due to the number of claims we receive.

Please note also that we cannot repay earlier than about two weeks after the P35 due date of 19 May (this is to ensure the bulk of P35s have been received and the information we need from contractors’ returns has been collated), but we can review your claim during that time to make sure we have all necessary information.

"Working Together" has allegedly been looking at this serious matter for maybe (I guess) over two years now.   My only comment on "Working Together" has to be "ineffectual". or "NOT Working Together".

AU 37 also says the following:

Q. What happens if I am asked to pay other outstanding liability while my CIS repayment claim is being processed?

A

. While we are dealing with your set off request, you may receive a request for payment of the outstanding liability you have asked to be set off. Please contact us on the telephone number given in the request for payment letter to enable us to deal with your outstanding liability more effectively.

When you contact us, please ensure you have details of when your set off was requested, the relevant reference numbers and  the amounts involved. We will need this information to verify your request is being processed. You will be asked to make payment of any amount owing over and above the amount of your set off request. If you have been asked to provide further information to support your claim, please send this to Employer Office promptly as we may decide to resume recovery of the liability if the repayment cannot be verified.

 

 

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By JulieY
29th Aug 2013 10:09

Try looking at the case of Paul Raymond Marsh v Commissioners, Tribunal Case Number 20091, April 2007 (you can find it on the Finance & Tax Tribunal website).

We successfully challenged a VAT surcharge on the basis of this case.

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By Chris Smail
29th Aug 2013 10:35

Write to the man responsible

Here

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By Mathswizard
30th Aug 2013 10:59

CIS Deductions from Limited Companies

I understood that HMRC are looking to revise the current CIS system, (monthly returns etc.,) once the teething problems with RTI have been resolved, to allow both to run together properly.  In the meantime, any attempt to reclaim overpaid CIS for Limited companies is met with a request for detailed schedules, copy bank statements and remittance advices.  HMRC are not prepared to pay us for our time spent preparing and cross referencing all the information and documention involved.  I have asked them if their records are incorrect.  I have a notified (by HMRC)  overpayment from 2007/08 of £7k, and have tried to recover this for the client, which has resulted in a claim, from HMRC, for £14k for the same year, the first request for this alleged underpayment !  I would suggest taking any difficult issues to the AAM Team, they are happy to talk to you on the telephone, and put you in touch with named officers.  I would also think carefully before advising a client to apply for a gross certificate, unless they are very disciplined they could find themselves with a huge underpayment at year end and struggle, provision needs to be made to put deductions into a interest earning account ready to be paid when due.   As for the suggestion to take issues up with local MPs, excellent but you need to telephone, letters take ages to get answers to !

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Replying to cathyne:
By mydoghasfleas
30th Aug 2013 16:20

Some mistake surely

Mathswizard wrote:

I understood that HMRC are looking to revise the current CIS system, (monthly returns etc.,) once the teething problems with RTI have been resolved, to allow both to run together properly. 

Was it only last month HMRC was spinning us a tale of how well RTI was doing?

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By jimeth
30th Aug 2013 11:20

Appraoch in Ireland is different

It is interesting to note that the approach with the Irish equivalent of CIS (RCT) is different.  Any RCT deductions suffered can be offset in-year against other tax liabilities including VAT.  So the equivalent problem should not arise in Ireland.  However, in some other respects the Irish system is even tougher than CIS.

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By magocks
30th Aug 2013 11:32

Agent Resolution Service

Get yourself registered with the Agent Resolution Service with HMRC. If you have exhausted all other avenues with HMRC and cannot get an issue resolved these guys will take your issue on board and take it through to a conclusion. Their advantage is that they have access to all HMRC departments and can co-ordinate the resolution.                                                                                                                                                      www.hmrc.gov.uk/agents/aam.htm                   

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Replying to I'msorryIhaven'taclue:
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By David Franks
20th Sep 2013 16:29

waste of space

magocks wrote:

Get yourself registered with the Agent Resolution Service with HMRC. If you have exhausted all other avenues with HMRC and cannot get an issue resolved these guys will take your issue on board and take it through to a conclusion. Their advantage is that they have access to all HMRC departments and can co-ordinate the resolution.                                                                                                                                                      www.hmrc.gov.uk/agents/aam.htm                   

 

Don't bother! We gave a case similar to that one in this thread to ours. Totally useless. As much tax knowledge as my cat, sided totally with HMRC and ended up saying agents cause the delays by doing too much progress chasing, tying up HMRC resources. We have written to the MP but we aren't charging the client (who is owed £82000 by HMRC) for this as he has no money as a result of HMRC and thus couldn't pay us anyway. I am starting to think an email to BBC Watchdog is the way to go. 

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By bernard michael
30th Aug 2013 11:38

I should know the answer to this but can you sue HMRC or are they covered by Crown Privilege?

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By sally1964
30th Aug 2013 11:55

AAM

Contact an Agents Accounts Manager. They might be able to get things moving.

 

Ask for VAT liability to set aside whilst refund on P35 is authorised.

 

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By Chris Smail
30th Aug 2013 12:14

Yes you can sue the board of HMRC

Address proceedings to Chairmans office

Sorry CEO: Lin Homer was appointed Chief Executive at HM Revenue & Customs

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By Worcester1
30th Aug 2013 12:53

confused on the cash flow

 I tend to agree the issue is cash flow management - the paying of the VAT at 20% surely has nothing to do with the CIS deduction against the invoices and is a bit of a red herring. If client invoices 10k for labour plus VAT, his customer will pay him 10K being 8k for the labour (after the 2k CIS deduction) plus 2K VAT.  The cash flow issue arises surely only if his own costs incurred are from his own subcontractors if they are on gross payment  and not because he has to pay over the VAT. If he does not pay subcontractors gross the subcontractors he pays will have CIS deduction which nets out,  or he is paying employees and can offset v the PAYE he would otherwise be paying.

Nevertheless, agree with the sentiment on the frustration with HMRC where they insist on keeping separate sums owed  from sums owing.

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RLI
By lionofludesch
30th Aug 2013 13:30

A mess

The big problem is that it's hard to keep a track of how much money is there.  It should be,like a bank, where you get a detailed statement of how much is in your account.  You aren't paying into this account, someone else is and you have to take their word that they have done. HMRC want to act as bankers so they should do the job properly.  As it is, they just tell you they've got a different figure, no detail provided, so you can't tell who's not chipped in the deduction they said they were chipping in.  I don't really buy this attitude of "it's up to you to keep records"  - they've got the taxpayer's money and it's not too much to ask for them to account for it properly.

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By Siany
30th Aug 2013 14:06

Ditto!

I am in exactly the same position, letters back and forth, cross referenced bank statements etc, client is due a refund of around 23k, still waiting.  Surcharges issued for RTI, which have been sent in ON TIME.  When finally able to get hold of someone concerning this have been told that yes the figures do agree with ours on one of their systems but not on the debt management system.  Time spent on sorting this (unclaimable) by me is unbelievable!

 

I too feel like packing it all in and going to stack shelves in Tescos!

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Replying to johnjenkins:
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By bigmuggsy
30th Aug 2013 21:03

Exactly

Siany wrote:

I am in exactly the same position, letters back and forth, cross referenced bank statements etc, client is due a refund of around 23k, still waiting.  Surcharges issued for RTI, which have been sent in ON TIME.  When finally able to get hold of someone concerning this have been told that yes the figures do agree with ours on one of their systems but not on the debt management system.  Time spent on sorting this (unclaimable) by me is unbelievable!

 

I too feel like packing it all in and going to stack shelves in Tescos!

You've just summed up what my business partner and I say on a daily basis.

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By taxbakbristol
30th Aug 2013 14:08

Limited Company CIS v VAT

I also had a problem similar to the one mentioned with the company unable to pay the VAT bill as HMRC were very slow in repaying the CIS due back.

I took HMRC to the FTT on the basis that CIS and VAT are all part and parcel of the Treasury and HMRC dropped the case 2 weeks before the FTT hearing and called off the debt chasers ...a firm of well known soicitors that they attempted to use then.

Play tough......its the only language HMRC understand.

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RLI
By lionofludesch
30th Aug 2013 14:40

Tradition

All part of the "Government always pays late so it's no excuse" culture.  The Government ought to be the pinnacle of business practice.  But it actually has very low standards for its own conduct.

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By amgirling
30th Aug 2013 16:53

Gross Status for cash flow

Per the other comments above, realising they are seperate taxes, but surely Gross status would have been the way to go at an early stage (unless there were other factors)  At this pont with the poor history attached to the company in terms of the payments for VAT as well as CT (in all likelihood) it would be difficult to get CIS 6 granted.

I would send a copy of the P35 to the VAT office advising of the refund due to the company, if nothing else it will make them aware of the refund awaiting authorisation.  Also to prevent further surcharges for the VAT try to ensure that current and future returns are both filed and paid on time to prevent further penalties.

On a seperate point my main concern in the lenght of time it takes HMRC to release refunds and the excuses and emphasis they lay on the subcontractors to evidence the CIS stopped when there are queries rather than provide a breakdown identifying those contractors for whom the figures do not agree and then pursue them directly, rather than rely on the subcontractor/their accountant to do all the legwork!

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By Ermintrude
02nd Sep 2013 08:11

Make a Formal Complaint

Following years of struggling where various HMRC knobs refused to acknowledge that their own crappy system resulted in a failure to file a P35 (despite email acknowledgements that it had been successful), I was ready to prepare a case for tribunal, but decided to lodge a complaint as well.  This came (eventually) from my Agent Account Manager in HMRC.

 

"(Compensation for HMRC error) All the necessary guidance can be found within the Complaints and Remedy Manual CRG 5000 and CRG 6000 http://www.hmrc.gov.uk/manuals/crgmanual/Index.htm may I also flag up the Complaints factsheet http://www.hmrc.gov.uk/factsheets/complaints-factsheet.pdf "

 

It worked, and it worked very quickly.  Penalties were waived, I billed the client for my time, client got my bill paid.

 

Do - please - give it a go, and post back here how you get on.

 

 

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By mydoghasfleas
20th Sep 2013 16:35

As much tax knowledge as my cat,

How do you know your cat is not working in an HMRC call centre when it goes out?  Purrfect job to get some money in the kitty.

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Replying to atleastisoundknowledgable...:
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By David Franks
20th Sep 2013 16:42

very funny

mydoghasfleas wrote:

How do you know your cat is not working in an HMRC call centre when it goes out?  Purrfect job to get some money in the kitty.

 

You have reminded me of something there. We had a junior position going here and get a CV from someone working in the call centre at HMRC. It didn't mention anything about tax, so I emailed her to task what he level of knowledge was, to which she replied 'I don't have any'. 

 

If I was nearer retirement I would love to start something against HMRC with expose s to the media and taking them to court every time they owe anyone. I am always nervous of doing anything like that while still in business in case they decide to persecute my clients or my firm. 

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By Siany
20th Sep 2013 17:14

MP

I have a meeting next week with our local MP.  I'ts way passed ridiculous.....................

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