Tax warning as HMRC take months to issue payouts to Brits

The UK's tax authority has been criticised for taking four months to pay out tax refunds, which used to take weeks, it has been reported. A group of MPs also told HM Revenue & Customs () its customer services processes are out of date and it needed to adopt new IT systems, including AI, to stop it becoming the target of a cyber attack.

also reported how one accountant was told her client would have to wait four months for HMRC to release the funds relating to a tax overpayment. Sir Geoffrey Clifton-Brown MP, chair of the Public Accounts Committee (PAC), said: "Customers at the moment are forced to engage with an authority that is frankly a lumbering dinosaur.

Nikki Ainscough, the managing director of York-based Equilibrium Accountants, said that in cases she was dealing with, HMRC was expected to take more than four months to process refunds of overpaid tax or national insurance.

In its report on the cost of the tax system, the Public Accounts Committee (PAC) said the cost of collecting tax rose 15% to £563 million between 2019-20 and 2023-24 while productivity per employee fell from £1.4m to £1.27m.

The PAC said the decline took place despite employing more senior staff, which added over £100m to 's salary costs .

PAC's report said HMRC still communicates too much with its customers by post and urged it to 'build taxpayers' needs into how it designs its systems.

MPs said HMRC needed to learn from issues with the rollout of its flagship transformation programme Making Tax Digital (MTD).

They concluded that MTD was imposed without much consultation on businesses, who did not know what the administrative costs would be.

The report said it found no strong evidence to suggest productivity improvements or other benefits for most VAT traders following MTD's introduction.

The report said:"The future extension of MTD to Income Tax self-assessment is set to impose further transitional costs for some taxpayers, with the ongoing costs of MTD to exceed ongoing savings by around £200 million each year

Sir Geoffrey said: " needs to do much more to restore trust and confidence in its taxpaying consumers.

"It is truly frustrating to see how much of its business the tax authority still does by post. Customers at the moment are forced to engage with an authority that is frankly a lumbering dinosaur. 's attempts to transform its services through Making Tax Digital, while generating extra revenue, have also imposed hundreds of millions in extra costs on the taxpayer, with more set to come. The report makes clear that it will cost self-assessment taxpayers £200m more than they save, and this is completely intolerable.

"Our inquiry has established multiple examples from other countries that could learn from in bringing its services up to date. We can see from the Committee's past scrutiny of the Passport Office that it is possible for public bodies to swiftly and radically transform their digital services while maintaining security. If it is possible for the Passport Office to achieve these outcomes, which handles just as much confidential information, then it will be possible for to learn the lessons and do the same."