Our view
20-Mr A and Mrs A brought this complaint to our Office as they remain unhappy with the responses they received from HMRC. From the outset they have made it clear to us that one of their aims in pursuing this matter is to prevent similar events from occurring to others in future.
21-Mr A tells us that as a former public servant, he feels passionately that steps are taken to ensure that others are not affected in the way he and his wife have been. In their complaint form to us, Mr and Mrs A outlined their concerns that HMRC had no system in place for handling possible fraudulent actions, like those of the Company.
22-Both HMRC and the AO advised that HMRC acted within its guidelines in issuing the 2019-2020 tax repayment to the Company.
23-The R40 form is available online on the Gov.uk website and enables people to claim a tax refund for the current tax year and the previous four tax years. The R40 submitted in this case was for the 2019-2020 tax year, so it fell within the relevant time period. Following receipt of the R40, the form was processed by HMRC on 28 September 2023 and the repayment issued to the Company.
24-Mr A contacted HMRC on 9 October and 10 October 2023 by phone and letter to inform them, that Mrs A had not given the Company consent to act on her behalf. HMRC provided Mr A with a copy of the authorisation form it had received from the Company on 11 October 2023. Mr and Mrs A’s MSP emailed HMRC on the same day to say that HMRC had not ‘conducted appropriate due diligence’ before it issued the monies to the Company.
25-Mr A followed this up with an online complaint on 27 November 2023 on the basis that HMRC had not responded to his correspondence. In addition, Mrs A submitted a further complaint letter on 3 December 2023.
26-HMRC issued its complaint responses on 3 December 2023 and 5 January 2024 and apologised for the delay. It explained that the R40 form checking process does not require HMRC to contact an individual before a repayment was issued, nor is it required to authenticate the signature.
27-Therefore, HMRC maintained that there were no service failings in in issuing the payment to the Company once the R40 had been received as HMRC did not need to undertake any formal checks to verify the document.
28-Mr A sent a further complaint letter on 14 January 2024 and outlined his dissatisfaction with HMRC’s actions as it had not spoken with or interviewed Mrs A, nor had it asked to review the evidence Mr A had gathered. Mr A’s letter explained that he felt the HMRC investigation of the complaint had been inadequate as it had not undertaken the above actions. As explained in our background, HMRC’s next response explained that Mr and Mrs A had reached the end of the complaints process.
29-The AO report explained it had seen the relevant guidance and the form submitted by the Company. When R40s are received by HMRC, there are specific fields in the form which must be completed for it to be deemed valid. This includes the customer’s name, their address, the year the claim relates to, and a valid signature, which may be digital or ‘wet’.
30-The AO explained HMRC is not required to verify or validate the signature on the form, nor is it required to contact the individual before it issues the repayment. In this instance, the R40 form was received on 6 September 2023, it included all the necessary information and the information within the form tallied with the information within Mrs A’s Pay As You Earn (PAYE) records. The AO noted that the Company used the correct version of the form, which was available on HMRC’s website at the time.
31-The AO concluded that, based on the above, HMRC had acted in line with the relevant guidance when it issued the repayment. The AO said that although HMRC had acted in line with the guidance by issuing the repayment, it was unable to comment on whether the signature on the R40 form was legally valid as that was outside its remit.
32-The investigation of potential fraud or criminal activity is a matter for the police or courts. As we know from the information Mr A has kindly provided to us, the police are investigating this matter further and the investigation is ongoing.
33-As part of our review of this complaint we have considered what Mr A has told us and the information we have received from HMRC about this complaint. In reaching our decision we have considered the information we have received from both parties.
34-The HMRC Charter states,
‘We’ll respect your wish to have someone else deal with us on your behalf, such as an accountant, friend or a relative. We’ll only deal with them if you have authorised them to represent you’.
35-We understand that it is not unusual for individuals to have someone acting on their behalf in respect of their tax affairs. This may be a professional representative such as an accountant or a tax agent, or a personal representative, such as a family member.
36-HMRC had received the R40 and a letter authorising it to act on Mrs A’s behalf. As HMRC had received both documents from the Company, the evidence available to it indicated Mrs A had given the Company permission to act on her behalf. This meant HMRC was obliged to make any tax repayments for the period listed on the R40 form (2019-2020 tax year) to the Company.
37-Like the AO and HMRC, we do not have the authority to investigate allegations that a crime has been committed, nor are we able to verify or authenticate individual signatures. We are also unable to give any view on the actions of the Company, as we may only consider whether HMRC acted appropriately, in line with applicable guidance and standards.
38-At the time of these events individual taxpayers could ‘nominate’ a tax repayment to a third party or agent, like the Company. HMRC’s PAYE Manual (the Manual) provides more detail on this. Section 91040 states,
‘A customer may nominate someone else to receive a repayment on his or her behalf by completing the appropriate authorisation on a return, claim form or repayment request form, in a letter, or telephone call […]
If, however, the claimant legally assigns a repayment to a third party by a deed or letter of assignment, the assignee becomes the person legally entitled to the repayment. The assignment is legally binding. We are obliged to make the repayment to the person to whom it has been assigned.’
39-Therefore, when it received the R40 and accompanying signed document, HMRC treated this as a valid ‘nomination’ in line with the Manual.
40-Mr A has provided us with a copy of the paperwork submitted to HMRC by the Company in September 2023. We have reviewed this document to ensure that we have had sight of all the relevant documentation in this case.
41-The form providing authorisation to the Company is an HMRC template form and clearly provides the name, address signature and National Insurance number for Mrs A. It also includes relevant contact details for the Company, including their address and their agent codes, which HMRC will use to process the form. The R40 form clearly indicates that any tax repayments should be sent to the Company. This form also includes a signature, which appears to be long to Mrs A. Both forms are signed and dated 2 September 2023 and show the tax year being claimed for ending on 5 April 2020.
42-The Manual sets out how HMRC staff should approach repayment claim forms, as referenced above in section PAYE91040. We have reviewed the Manual, and the copy of the documents provided to us by Mr A. There is no ambiguity in the document HMRC received, and it clearly states that Mrs A nominated the Company to receive any tax payments owed to her.
43-There is nothing within the PAYE Manual that indicates HMRC is required to, or should, verify the nomination documents it receives if an application provides the applicant’s signature. This means that HMRC is under no obligation to contact either party to verify or confirm if the information or signatures provided are correct.
44-As there is no indication that HMRC failed to act in line with applicable guidelines and standards at the time, we will take no further action.
45-We understand that this will be upsetting for Mrs A to read, and we are sorry for the distress this will cause, particularly as she tells us that she has not signed this document and is having to deal with the stress of being a victim of fraud. As the police investigation into this matter is ongoing, we hope that this may provide Mr and Mrs A with the answers and resolution they are seeking.
46-However, we would like to reassure Mr and Mrs A that this matter has been considered on a larger scale by HMRC. Although in this instance we are unable to find any indications of service failing by HMRC, we are aware it has been looking into cases like this in more detail to resolve concerns of this nature.
47-We are aware that since late 2022 HMRC has taken steps to investigate the matter of third-party companies contacting it to request repayments on behalf of their clients. This included conducting a public consultation on the use of repayment agents. Having done so, the Government has made some changes to the way HMRC may handle requests for repayment of tax.
48-The Finance (No. 2) Act 2023 section 333 now prevents the reassignment of repayments to third parties. This means that, from 15 March 2023, reassignment of repayments to agents is no longer possible. As such, the problems that Mrs A describes to us should no longer occur.
49-We know this change was introduced after the events of Mrs A’s complaint and so cannot change her experience, but we hope that this reassures her that the concerns she and others in her position have shared have resulted in improvements which mean members of the public are protected from such experiences in future.
50-In addition, we corresponded with HMRC to find out more about the changes to its guidance to help prevent any such cases occurring in the future. HMRC advised us that its guidance was updated in November 2024, specifically the section 91040 of the Manual, referenced above.
51-HMRC went on to say that the staff were being made aware of these changes in the law and its own internal guidance had been amended to reflect this. HMRC explained that all details on the claim form, like an R40 form include the name, address, National Insurance Number (NINO) and date of birth and that these must match the information held on HMRC’s system. If they did not match, then they would be automatically rejected. If HMRC receives all the correct paperwork, it will not contact customers before issuing the payment.
52-In cases like Mrs A’s where the claim related to PPI, HMRC said it now asked for evidence of certain job expenses claimed via a letter or a P87 form. In addition, they explained that an individual is now able to withdraw a nomination in writing or over the phone up to the point HMRC issues the refund.
53-We are pleased to see these positive changes have been introduced and we hope this provides some comfort to Mr and Mrs A.
54-HMRC has also introduced some changes in relation to ‘repayment agents’ and it now requires all repayment agents to register with HMRC. They must provide their Agent Reference Number (ARN) on the relevant form (e.g. the R40 form) and this will enable HMRC to check if the agent’s ARN is valid. If the ARN is deemed to be invalid, then HMRC will reject the nomination and repay the individual customer directly.
55-Further to the above, HMRC provided us with additional information about the changes that are applicable to its staff. We asked HMRC about this and it explained that its internal ‘Guidance Gateway’ tells staff how it should process nominations and Deeds of Assignments (DOAs). DOAs are legal documents assigning another person to collect a repayment.
56-This differs slightly to Mrs A’s circumstances as the form provided to HMRC in her case was a nomination, not a DOA. As part of its submission to us, HMRC provided us with evidence of the Gateway Guidance, so we were able to verify for ourselves that these changes had been introduced.
57-Taking all of the above into account we can see that HMRC has undertaken a number of steps to help improve and tighten its current procedures around repayment agents and nomination forms. We are satisfied that, taken as a whole, these steps demonstrate that HMRC has introduced proactive changes to help prevent such cases from occurring in the future.
58-We hope Mr and Mrs A are also reassured to see the service changes that HMRC has implemented, particularly as Mr A has told us in his correspondence that he hopes others are not put through the situation he and his wife have experienced.
59-After taking all of the above into consideration, we will take no further action in respect of this part of the complaint. We cannot see any indications that HMRC acted outside its own guidance when issuing the repayment to the Company. However, although this will be disappointing to Mr and Mrs A, we hope they are reassured to see the various changes HMRC has brought forward to tackle this issue going forward.
Communication
60-Mr A and Mrs A have also complained to us about matters relating to HMRC’s communication with their MP and MSP. Mr A tells us that he is unhappy that HMRC ignored information from Mrs A’s MSP and would not discuss the complaint with her.
61-The AO highlighted that of the seven letters they sent to HMRC, they only received two responses. The AO said in addition to these seven letters, Mrs A also submitted an online complaint form via the HMRC website, which was not acknowledged.
62-They explained that HMRC did not acknowledge each letter individually but provided formal complaint responses to Mr and Mrs A and their MSPs. The AO acknowledged that there had been delays in providing these responses but did not consider these to be unreasonable. The AO noted that HMRC had apologised for this poor service, which is said was ‘an adequate remedy’. On this basis the AO said it would not uphold this part of the complaint.
63-As part of our enquiries, we asked HMRC to provide us with copies of its complaint responses to Mr and Mrs A. HMRC provided us with this information and we can see that HMRC has apologised for these delays in its replies.
64-We can see that delays in providing responses to Mr and Mrs A’s concerns is not in line with HMRC’s Charter, which says ‘We’ll answer your questions and resolve things first time, or as quickly as we can’. As such, we agree there are indications here that HMRC did not act in line with applicable standards, and this clearly caused Mr and Mrs A some avoidable frustration.
65-Therefore, we have considered whether this is an appropriate remedy for the delay in providing a response. HMRC’s ‘Complaints and Remedy Guidance’ (the Guidance) addresses the subject of delays in section CRG4025 and CRG4050. The Guidance explains that ‘all delays are regrettable and may require an apology and an explanation’.
66- In addition to the Guidance we reviewed our own ‘Principles for Remedy’, which state that remedies ‘should be fair, reasonable and proportionate’. Our ‘Guidance on Financial Remedy’ also indicates that for instances of frustration similar to those in this case an apology is a suitable action to put things right.
67-With this in mind, we think the apology offered by HMRC is a proportionate and appropriate remedy for the delayed responses to Mr and Mrs A. As such, we will take no further action.
68-We would like to thank Mr and Mrs A for sharing their complaint with us. We know they continue to be concerned about the matters raised in this complaint, so we hope our explanation above clearly sets out how we thought about these issues and how we reached our decision.