HMRC Criticized for Excessive Delays in Tax Refund Processing: Over Four Months Wait!

HM Revenue and Customs (HMRC) is facing criticism for processing tax refunds in over four months, a task that previously took just a few weeks according to accountants.

These delays are occurring simultaneously with frustration over HMRC’s decision to discontinue a complimentary online service that has been beneficial for small businesses.

Additionally, HMRC has been scrutinized by Members of Parliament for various issues, including an increase in average call waiting times to over 23 minutes and the overall complexity of the tax system becoming more burdensome.

The Public Accounts Committee (PAC) of the parliament recently expressed concerns that public trust in HMRC is declining. They pointed out that the Making Tax Digital initiative has led to the imposition of significant additional costs on taxpayers.

Nikki Ainscough, managing director at Equilibrium Accountants in York, noted that HMRC’s processing time for tax or national insurance refunds now extends beyond four months. She highlighted the delays particularly affect the Pay As You Earn (PAYE) system and the Construction Industry Scheme (CIS) which mandates contractors to deduct taxes for subcontractors.

Ainscough mentioned a specific instance where a client overpaid on their PAYE and has been informed they must wait until August for reimbursement, despite the request being made in March.

She displayed a response from HMRC stating that a reply could be expected by 22 August 2025, while they were still processing requests from 10 December 2024.

Ainscough, who has been running her accountancy firm for 12 years, remarked that such refunds typically took four to six weeks and questioned the significant increase in wait times.

“If there’s such a backlog, it indicates a high number of claims and potentially a significant amount of money owed to small businesses and individuals at a crucial time for cash flows,” she added.

Ainscough utilized an HMRC online tool to estimate when another client might receive a self-assessment refund of over £1,000, submitted on 24 April. The tool projected a response by 15 June 2025 but noted that additional time up to 12 weeks might be needed to issue the repayment.

It is believed that HMRC’s delays are partly due to some staff participating in industrial action.

An HMRC spokesperson stated that efforts are underway to improve response times by assigning more staff to handle these claims.

They added, “Significant improvements have been made in our customer service. Customer satisfaction is currently about 80%, and the funding we have received will allow us to meet our service standards for 2025-26.”

HMRC also noted that most refund requests do not require the additional checks that can extend up to 12 weeks.

Another significant development that concerns businesses is HMRC’s recent announcement that the free online service for filing tax returns and accounts will be discontinued by the end of March 2026. This service has been a valuable resource for many small enterprises to manage their annual accounts and compute corporation tax.

HMRC explained that the service does not comply with modern digital standards or recent changes in UK company law, and from next April, businesses will need to transition to third-party software.

A reader expressed dismay to the Guardian: “This means people will have to pay for commercial software just to have the privilege of paying corporation tax to the government.”

Prices for accounting software vary, with basic plans starting around £15 per month, while others may cost significantly more. Purchasing a software package outright might exceed £100.

“The online service was simple and straightforward… Withdrawing it seems like a backward step,” the reader commented.

Ainscough believes HMRC has opted not to invest in maintaining the software, noting that “Most people have already been forced onto third-party software,” with some providers fully capitalizing on this requirement, while others continue to offer good value.

An HMRC spokesperson clarified, “This transitional service was introduced in 2015 to aid small, unrepresented companies in adapting to online filing when the software market was limited. It is appropriate that we end this outdated support now that there is a variety of commercial software available that offers superior service, and we have published guidance to assist companies with this transition.”