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Is this a new process for CIS taxpayer repayments?

CIS repayments suspended awaiting taxpayer response to HMRC letters

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I have recently had two separate unrelated cases where a CIS subcontractor client has claimed his repayment through SA and the HMRC record shows the prepayment as ‘pending’ for an unusually long time.

I have, on both occasions telephoned and spoken with HMRC who tell me this is part of a verification process, where the client is sent a letter by post, asking for additional information. Their tax repayments are suspended in lieu of a correct response and failure to respond at all, will apparently, result in their SA account being closed!

Of these two cases, the first was a teenage lad who had just finished his apprenticeship and was in this first year as a subcontractor (he said he thought his Mum just threw the letter away), the second had recently moved address and hadn’t received the letter.

HMRC was unable to tell me, as authorised agent, what was in the letters and could only arrange for a duplicate to be re-sent to the clients within the next 30 working days, potentially SIX weeks!

While I appreciate that verification checks are a routine part of the CIS/repayment process, and in both cases, the client had failed to respond,  I felt that asking the client to wait a further 6 weeks for the arrival of the letter, followed by however long it may take for HMRC to process the response, was pushing it a little!

There must be cases when the letter never reaches the client and without an advisor, they may never realise their SA account has been suspended or closed.

In 30 years, I have never come across this before, and now, twice in as many weeks – is this something new, or have I just been extremely lucky??

Replies (15)

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By rmillaree
27th Jul 2021 20:19

its hard to know if this is seiss grant related (you should be expected to be cut out the loop to a certain degree ifd it is - whether thats right is another matter )

or cis voucher mistmatch related - thats a common query with companies - less so with sole traders. Perhapos they treat the info there similar to employment income from security risk perspective where they will only send data to clients home address.

i would be reasonably confident its one of the two

You cant really blame hmrc though for playing hard ball if individuals are going out there way to not take their obligations seriously !!! ie not advising in timely manner they have moved (when there is a pending rebate too!!) or simply destroying stuff for an unfathomable reason (other than youth)

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Replying to rmillaree:
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By suepg
27th Jul 2021 22:37

Hi and thanks for the reply

Neither client claimed SEISS, both being relatively newly self employed.

The first, has only himself to blame, however it should be noted that his HMRC letter was actually sent to him back in February - before he became a client or ever submitted his first self assessment return requesting a repayment.

The second client had successfully received his first ever CIS repayment in January 2021 following submission (by us) of his first ever SAR . His second SAR for 2021 was submitted by us in May 2021, just 4 months later & the letter was sent to him in June. He moved address in May & the new address was included in that SAR.

Although we discovered the missing HMRC letters following the submission of the SAR & claim, both of these letters appear to have possibly been issued before the claims were processed.

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By Paul D Utherone
27th Jul 2021 20:51

Yes it is a relatively new process, and has been mentioned here before a number of times.

The letter seems to be trying to do a lot of things, including (by the tone on the questions) highlight / capture those claiming Uniform allowances through the plethora of ambulance chasing firms that you find on social media or a google search.

The letter also asks for AML type proof of identity (photo ID & utility bills)

One of the HMRC responses on the Agent Forum:

"We have received the initial response from the business area.
When a customer submits a Self-Assessment Tax Return resulting in a repayment of tax being owed to them, HMRC undertakes routine checks to ensure the claim is genuine and to identify potential compliance risk. Where our risk indicators suggest that the customer or claim may not be legitimate, we will contact the customer to confirm their identity. This will include the requirement for the customer to provide documentary evidence to prove who they are, and to answer some basic questions about the repayment request they have submitted.

We recognise that a small number of genuine claimants may receive our letters. We try to keep this process as simple as possible, but the customer must still respond as requested to the letter. If the customer is uncertain about any aspect of the correspondence or needs additional support, they should contact us on the official Self-Assessment helpline number provided."

Also:

"Whilst our risk profiling is rigorous (and less than 1% of the customers we ask to confirm their identity in this way are genuine), we are constantly seeking to improve on this by reviewing and incorporating lessons learnt from genuine customers’ responses.

Where we know that specific agents undertake sufficient due diligence identification and verification checks, we address some of those cases in a different way. We are also working hard to cross reference our data to ensure we do not contact genuine customers unnecessarily. However, sometimes customers that have been verified by their agent may appear to have been subsequently hijacked by a third party. Therefore, we may still issue correspondence to those customers to ensure their record has not been compromised. In some cases,

HMRC have also identified pockets of activity where due diligence checks have not been completed as they should have been. We address this appropriately with the agent in addition to disallowing any necessary repayments of tax in order to protect the public purse."

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By SteveHa
28th Jul 2021 08:58

We are coming out of a pandemic. HMT are skint (they had to spend the last of their coffers on Boris' flat), and these are compliant taxpayers with no penalties to prop HMT up.

So HMRC came up with a cunning plan, rob compliant taxpayers of their money, instead.

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Replying to SteveHa:
By petersaxton
28th Jul 2021 09:03

"compliant taxpayers" - people who dont respond to letters from HMRC!?

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Replying to petersaxton:
By SteveHa
28th Jul 2021 10:54

Not responding to a letter for which there is no statutory basis does not make a taxpayer non-compliant.

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Replying to SteveHa:
By petersaxton
10th Aug 2021 17:51

So taxpayers are not expected to answer queries from HMRC?
They can just say "I'm not answering. Give me my refund."

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Replying to SteveHa:
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By Tax Dragon
11th Aug 2021 07:21

SteveHa wrote:

So HMRC came up with a cunning plan, rob compliant taxpayers of their money, instead.

To me it's common sense to check who someone is before you hand over your dosh. This should have been routine at least 20 years ago.

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By K81
28th Jul 2021 11:05

the few I have seen have been an old style R38 claim authorising repayment, although in one case HMRC did want a list of contractors that the client had worked for in the period.

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Replying to K81:
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By suepg
28th Jul 2021 12:00

Only when I replied to an earlier post, did I realise that the first of my clients had not even submitted his first SARwhen his 'letter' was sent to him - so his would not appear to be CIS related.

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Replying to suepg:
By K81
28th Jul 2021 15:10

one of mine received the R38 for the 2020 repayment which was still on his records, could it be for an older year?

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Replying to K81:
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By suepg
28th Jul 2021 20:32

No, one of these clients was a young lad who was completing his first SAR after less that a year of self employment.
The second of the clients had traded for part of the 2019-20 tax year and 2020-21 was his first full trading year. He had, quite recently received a repayment for 2019-20 in February 2021

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By suepg
10th Aug 2021 17:27

I am now able to confirm that I have received a copy of one of these letters from HMRC

This is a 'SURF2' letter issued to claimants of tax repayment under SA. It requires the anticipated ID checks - as required under MLR and it clearly states this is NOT an enquiry into the SAR under s.9A

I find this questionable as it then goes on to ask for additional information 'required to confirm identity' as follows:
All payment & deduction certificates under CIS in the YE:05.04.21
The names and addresses of all contractors worked for
Bank statements showing all payments received from contractors in that year
All P60s or P45s from employment in that year
Written confirmation that evidence is held to support all claims for tax relief

It also comes with a questionnaire asking who helped you to complete your SAR, who submitted it and what fee was paid to them.

That sounds like a pretty conclusive enquiry to me!

From my point of view, the clients affairs, on this occasion were tiny and very very straightforward, and we had carried out due diligence identification and verification checks prior to engagement, but nevertheless, this does not sit comfortably with me.

It looks like the letter referred to by Paul D Utherone, thank you, but is a little more invasive!

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Replying to suepg:
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By Southwestbeancounter
10th Aug 2021 18:35

We had one of those for a client who made a voluntary disclosure to HMRC and paid them a large sum of money. HMRC have wanted one of those letters completed for the client to get around £170 back as we estimated the late payment interest due and we slightly overdid it.

The form was completed and returned in early April and we are still waiting for the modest 'pending repayment' to be made!

It's a disgrace and somehow what we have to put up with on a daily basis needs to reach the mainstream media and to be taken seriously!

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Replying to Southwestbeancounter:
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By suepg
11th Aug 2021 07:34

Surely this is an enquiry into the client's SAR - however HMRC choose to disguise it??
It seems to have very little to do with identity verification

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