14.Mrs A brought this complaint to our Office as she remains unhappy with the HMRC and AO complaint responses. We are sorry to hear of the impact these events have had on her.
15.Mrs A complains that HMRC had no system in place for handling possible fraudulent actions, like those of the Company. She has expressed her dissatisfaction that ‘scammers’ like the Company have ‘got away with it’ and she has made it clear to us how unhappy she feels about the lack of action taken by HMRC.
16.Both HMRC and the AO advised Mrs A that HMRC acted within its guidelines in issuing the tax repayment to the Company.
17.As we explained above, 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. This means that the two tax years claimed for, fell within the four-year limit. Following receipt of the R40 documents, the form was processed by HMRC and the repayment issued to the Company in August 2023.
18.Mrs A and her Representative Mr B have provided us with a copy of the R40 forms. We can see this states that the repayment relates to Mrs A, however the repayment instructions include the contact details for the Company.
19.HMRC issued its complaint responses in November 2023 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. It said that in sending the cheques to the Company it had acted in line with its guidance.
20.Moreover, HMRC said that it was unable to get involved with the transfer of funds between Mrs A and the Company, and in particular how much the Company paid Mrs A. HMRC said this was a matter between an ‘agent and their client’. HMRC added that since her complaint about this matter it had updated its records and removed the Company from her account to ensure any future refunds would not be sent to them.
21.Therefore, HMRC maintained that there were no service failings 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.
22.Mrs A progressed her complaint to the AO as she was unhappy with the response she received from HMRC. As part of its response, 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’.
23.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. The R40 form was received in August 2023 and included all the necessary information and tallied with the information within Mrs A’s Pay As You Earn (PAYE) records. On this basis the AO did not uphold Mrs A’s complaint as HMRC had acted within the relevant guidelines.
24.The investigation of potential fraud or criminal activity is a matter for the police or courts. Our Office is unable to consider whether fraud has taken place, nor are we able to involve ourselves with criminal cases. If Mrs A wishes to consider approaching the Police about this matter, then this remains open to her.
25.As part of our review of this complaint we have considered what Mrs A has told us and the guidelines HMRC follows when dealing with such matters. 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’.
26.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.
27.HMRC received R40 forms authorising the Company 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 to the Company. We recognise Mrs A did not give permission for this and she is angry that this has been allowed to happen.
28.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.
29.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 […] ’
30.Therefore, when it received the R40 and accompanying signed document, HMRC treated this as a valid ‘nomination’ in line with the Manual.
31.The form providing authorisation to the Company is an HMRC template form and provide 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. These forms also include a signature, which appears to belong to Mrs A. We are unable to confirm if this is a valid signature or not.
32.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 Mrs 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.
33.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.
34.As HMRC acted in line with applicable guidelines and standards at the time, we will take no further action.
35.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 we have previously stated, Mrs A may still pursue this as a criminal matter via the Police if she wishes. We hope that doing so may provide her with some resolution.
36.However, we would like to reassure 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.
37.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.
38.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 section 91040 of the Manual, referenced above.
39.HMRC went on to say 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.
40.In cases 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.
41.We are pleased to see these positive changes have been introduced and we hope this provides some comfort to Mrs A.
42.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.
43.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.
44.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.
45.Taking all the above into account we can see that HMRC has taken several 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. We hope Mrs A is reassured to see the service changes that HMRC has implemented.
46.Based on the above, we will take no further action in respect of this. We found HMRC acted in line with its guidance in issuing the repayment to the Company. While this will be disappointing to Mrs A, we hope they are reassured to see the various changes HMRC has brought forward to tackle this issue going forward.