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HMRC leaves taxpayers out of pocket with delays on refunds

Thousands of struggling taxpayers are waiting up to three months or more for repayments of tax from HM Revenue & Customs (HMRC) as a result of new random security checks, accountants have warned.

Taxpayers will receive no interest on the repayments of tax owed to them, thanks to changes introduced in January, nor any compensation for the new delays on refunds. But the Government is still legally entitled to charge interest above the Bank of England base rate in addition to surcharges on tax which taxpayers fail to pay on time.

"Delays in repaying tax to which taxpayers are fully entitled are causing enormous financial distress at a time when many people are teetering on the edge of survival," says Rob Durrant-Walker, a tax manager at accountants UHY Hacker Young. "HMRC expects taxpayers to pay their tax on time or face interest and penalty charges. It's seems unfair that when the boot is on the other foot and HMRC takes months to issue refunds it does not have to compensate taxpayers.

"This is a growing problem which seems to have worsened with the recession. HMRC is not repaying tax unless chased for several months," he says, noting that HMRC has earmarked £1bn to tackle tax evasion rather than ensure the smooth running of its operation.