Tax office delays leave small businesses on the brink of collapse

Small businesses face going under because of crippling delays at the tax office, which have resulted in rebates going unpaid for months on end.

HM Revenue & Customs is taking several months to process post and deal with issues that should take weeks under normal circumstances. It means taxpayers are missing out on large refunds, which has severely impacted businesses’ cash flows.

Experts said the number of HMRC staff working from home was likely to blame, as well as a clampdown on furlough fraud requiring taxpayers to provide additional verification.

Myelin Verboom of tax firm Mcas said one of her clients was still waiting on a six-figure payment and their business could go bust if they did not receive it soon. “We have a property developer who bought a block of buildings, incurring a £250,000 VAT bill, which was deductible,” she said. “They have been trying to claim it back, but the delays are so bad they have not even been able to register their business.”

HMRC has always aimed to refund overpaid VAT within 30 days. “There is a real risk these delays will end up pushing firms out of business because of cash flow problems,” said Ms Verboom.

The tax office also aims to turn around at least 80pc of post within 15 working days. It is currently managing to clear 39pc of letters within that period.

Stuart Crofton of accountancy firm Stuart Crofton Tax said anything that required human intervention was taking longer than normal.

Lisa Styles of Hespera, another tax firm, said even simple tasks such as registering for self assessment were being delayed, meaning newly self-employed people faced being fined for late filing or payments next year. Self assessment services were affected after 5,000 staff were seconded to provide Covid-19 support during the crisis. She said a higher number of checks being carried out due to furlough fraud was also creating a backlog. The introduction of new rules allowing staff to work from home two days a week also means fewer staff in the office. A spokesman for HMRC said: “We know there is more to do to improve turnaround on customer correspondence and we expect to see further improvements as we emerge from the pandemic and continue to rebalance how we prioritise our resources.”