HMRC appears to have stepped up the number of repayment security checks it undertakes, judging by an influx of letters we have recently seen.
Repayment claims are checked when a risk is activated which raises HMRC’s suspicion about the validity of a claim.
Here are some of the circumstances which may trigger a security check:
- A claim is made where the taxpayer address differs from that shown on their self-assessment record.
- Previous correspondence sent to the taxpayer address has been returned undelivered by the Post Office.
- The taxpayer deceased signal is set on the self-assessment record.
- The taxpayer is insolvent.
- The repayment claim exceeds HMRC’s limits for automatic processing.
HMRC also stops repayments being made when certain signals are present on a taxpayer’s self-assessment record, such as the Budget Payment Plan or No Repayment signals. The Budget Payment Plan signal is self-explanatory, but the No Repayment signal is placed on a taxpayer’s self-assessment record usually when a tax enquiry is under way, or some tax has previously been remitted and HMRC considers bringing it back into charge.
What does HMRC do?
If HMRC has decided to begin a repayment security check, a letter will be issued to the claimant, highlighting the tax return selected. The introductory paragraph sets the scene:
‘As part of our security procedures we check a number of returns to make sure that the repayment arising as a result of the figures entered on this return is correct. My check is being made in accordance with the Collection and Management Powers as set out in the Commissioners for Revenue & Customs Act 2005.’
Information will then be sought to verify the address and identity of the person making the claim.
One document has to be submitted proving the claimant’s address, with HMRC willing to accept the following from ‘List A’:
- A household utility bill, as long as it is no more than three months old.
- A bank, building society or credit card statement, again as long as it is no more than three months old.
- A council tax bill for the current year.
- An original mortgage statement from a recognised lender issued for the last full year.
- A copy of a tenancy agreement or similar if the claimant lives in rented accommodation.
- A benefits or pensions notification letter confirming the right to benefit.
- A solicitor’s letter confirming a house purchase if the claimant has moved recently, supported by proof of the previous address occupied by the claimant.
Two further documents have to be submitted to prove the claimant’s identity, which can either both come from ‘List A’ or include the following from ‘List B’:
- A copy of a current, valid full passport, which must show the nationality, place and date of birth, passport number, expiry date, photograph and signature.
- A copy of a current, valid UK photo-card driving licence.
- A copy of any Residence permit issued by the Home Office to non EU Nationals.
- A copy of an HMRC Forces ID card.
Three forms of address and identity documents have to be submitted in total.
The address and identity checks can sometimes be supplemented by requests for evidence in support of the actual repayment claim, such as invoices and receipts and the claimant’s National Insurance Number.
In addition to the documents requested, HMRC also insists upon the submission of:
- A fully completed R38 form.
- A recent bank/building society statement for the account shown on the completed tax return.
Finally, HMRC also asks for a questionnaire to be completed.
The Repayment Questionnaire has 13 questions in total, including:
- Did you personally submit your tax return for the year?
- Was the tax return submitted using your online account with HMRC?
- Did you give your HMRC or Government Gateway user ID and password to anyone in order for them to file your tax return? If so, please provide the name of the individual.
- Before submitting the tax return, were you satisfied the figures were accurate?
- Did anyone help you to complete the tax return?
- Were you charged a fee or percentage of the repayment?
- What is your relationship/connection to your repayment nominee?
Completing the check
HMRC expect all of the information requested to be submitted within 6 weeks of receiving the letter. In the meantime, the repayment sought is withheld.
Author: Guy Smith, Head of Technical Research