21. Mr A brought this complaint to us as he remained unhappy with the HMRC complaint responses. We are sorry to hear how these events have affected Mr A.
22. Mr A complains that HMRC had no system in place for handling possible fraudulent actions, like those of the Company. He has expressed his dissatisfaction that the Company kept his refund, and he has made it clear to us how unhappy he feels about the lack of action taken by HMRC.
23. Both HMRC and the AO advised Mr A that HMRC acted within its guidelines in issuing the tax repayment to the Company.
24. 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 December 2022.
25. Mr A has provided us with a copy of the R40 form. We can see this states that the repayment relates to Mr A, however the repayment instructions include the contact details for the Company.
26. HMRC explained it does not need to contact individuals or verify signatures before issuing repayments. It said it followed its guidance when sending cheques to the Company and stated the transfer of funds between Mr A and the Company was a matter between them.
27. HMRC confirmed it removed the Company from Mr A’s account to prevent future refunds being sent to them. It maintained there were no service failings, as it is not required to carry out formal checks once the R40 is received.
28. The AO explained the R40 form must include specific details, such as the customer’s name, address, claim year, and a valid signature. The AO said HMRC is not required to verify signatures or contact individuals before issuing repayments. It said Mr A’s form met the requirements, so did not uphold his complaint
29. As part of our review of this complaint, we have considered what Mr A 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’.
30. We understand that it is not unusual for individuals to have someone acting on their behalf in respect of handling their tax affairs. This may be an accountant, a tax agent, or a personal representative such as a family member.
31. HMRC received an R40 form authorising the Company to act on Mr A’s behalf. As HMRC had received both documents from the Company, the evidence available to it indicated Mr A had given the Company permission to act on his behalf. This meant HMRC was obliged to make any tax repayments for the period listed on the R40 form to the Company. We recognise Mr A says he did not give permission for this, and he is unhappy that this has been allowed to happen.
32. 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 […]’.
33. Therefore, when it received the R40 and accompanying signed document, HMRC treated this as a valid ‘nomination’ in line with the Manual.
34. The form providing authorisation to the Company is an HMRC template form and gave the name, address, tax year, signature and National Insurance number for Mr A. It also includes relevant contact details for the Company, including their name, address and their agent code, which HMRC used to process the form.
35. The R40 form submitted clearly indicates that any tax repayments should be sent directly to the Company. This form also includes a signature, which appeared to belong to Mr A. We are unable to verify if this is a valid signature or not.
36. 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 Mr A nominated the Company to receive any tax payments owed to him.
37. 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 not required to verify or confirm if the information or signatures provided are correct.
38. As HMRC acted in line with applicable guidelines and standards at the time, we will take no further action.
39. The investigation of possible fraud or criminal activity is outside our remit. Such matters fall under the jurisdiction of the Police or the courts. We cannot determine whether fraud has occurred or involve ourselves in criminal cases. Mr A retains the option of approaching the Police to pursue this matter further if he so wishes.
40. We understand that this will be upsetting for Mr A to read, and we are sorry for the distress this will cause, particularly as he tells us that he has not signed this document and is having to deal with the stress of being a victim of fraud. As we have previously stated, Mr A may still pursue this as a criminal matter via the Police if he wishes. We hope that doing so may provide him with some resolution.
41. We would like to reassure Mr 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 undertaken a detailed review of its cases like this to address such concerns.
42. We are aware that since late 2023, HMRC has taken steps to investigate the matter of third-party companies contacting it to request PPI 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.
43. 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 Mr A describes to us should no longer occur.
44. To prevent similar issues in the future, HMRC has also introduced a requirement for all ‘repayment agents’ to register with it. Agents must provide their Agent Reference Number (ARN) on relevant forms such as the R40. This enables HMRC to validate the ARN. If the agent’s ARN is found to be invalid, HMRC will reject the nomination and instead issue the refund directly to the individual.
45. HMRC also requires further evidence from the bank or building society the untaxed interest originates from to support the claim. In addition, individuals can now withdraw a nomination in writing or over the phone before HMRC issues the refund.
46. Based on the above we found HMRC followed its guidelines in issuing the repayment to the Company after receiving the R40 form. We will take no further action in respect of this.
47. We know this change was introduced after the events of Ms A’s complaint and so cannot change his experience. While this may be disappointing to Mr A, we hope this reassures him that the concerns he and others in his position have shared have resulted in improvements which mean members of the public are protected from such experiences in future. We wish him well in for the future.