Our client due a repayment of c£10K. Client signed to us to receive. Our fees £3.5K (not all for repayment but for other work as well).
HMRC made payment direct to clients bank. Clients bank have used repayment to pay overdraft back and then reduced overdraft to that extent. Our fees not paid.
Have checked with both client and HMRC - HMRC def made the error it was not a case of client requesting going to them.
Q - are HMRC permitted to do this and assuming not then do we have any recourse and how can we stop this happening in the future. Would be interesting to learn whether any one else has experience of this.
Replies (7)
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I don't know the answer, as it is...
..ultimately a legal question ("do we have any recourse").
It is indisputable the primary relationship is between HMRC and the taxpayer.
And that HMRC has (presumably?) failed to follow the instructions of the taxpayer (i.e. the taxpayer gave HMRC notice to pay you, not himself). So if the taxpayer suffered loss as a result of this failure by HMRC, then it would seem straightforward.
However I am not at all clear about the position where it is the agent (even where it is clear that HMRC are accepting submissions made by the agent on behalf of taxpayer) who suffers loss. Seems difficult? Have you tackled HMRC on this yet?
(I am of course assuming it is the case that the taxpayer cannot pay you your fees?)
Its the clients money
so i do see much chance of you getting anything from HMRC. But assuming you completed correct bits on page TR5 how did HMRC get his bank detail?
Unlikely
As has been mentioned it is after all the client's money in the end whether they agreed for it to be paid to you or not and so I can't see the Revenue giving up anything.
Some people might say the blame lies with the client for running up such a large overdraft and that they may have a bad relationship with the bank if they suddenly reduced the overdraft as soon as they got some cash in the account.
Does your client have any recourse with the bank for their actions which have affected his business leaving him unable to pay his accountant.
I know this all sound harsh and we'd all like to get something from the Revenue when their mistakes affect our clients and our own business.
You're an agent
You are an agent, the client is the principal. If HMRC repay direct to the principal, your only recourse is against the principal.
This has been a problem for years!
Have a look at tax bulletin number 24 (towards the end), issued in August 1996: -
http://www.hmrc.gov.uk/bulletins/tb24.htm
"Where a taxpayer wishes, he or she may authorise the Revenue to make a repayment to his or her agent. Agents should, however, be aware that a Revenue form containing such an authority does not impose a legally binding obligation on the Revenue and is a service to the taxpayer rather than creating obligations to the agent.
There have been a number of complaints recently from agents where the Revenue has failed to observe an authority on form R38 and the agent has subsequently had difficulty in obtaining payment of fees from a client. Among others, the Institute of Chartered Accountants of England & Wales has made representations to the Revenue to improve our procedure."
They obviously need more than 13 years to improve their procedure!
No
you have no recourse to HMRC at all.
This is a longstanding problem. The moral is, never rely on tax repayments to pay your fees.
don't forget the newish fraud
problem facing HMRC (and ultimately all taxpayers).
It is reported there has been a recent surge in theft by false online submissions (using valid login details and passwords) with an apparent claim for refund, and requesting payment to a third party bank account.
I have no idea if this problem has led to a change in HMRC policy about making payments to anyone other than the taxpayer's account. I have not heard of such a change in policy, but it might make sense if the problem is as big as is being claimed in some quarters.