Royal London, the UK’s largest mutual life insurance and pension company, says analysis it conducted showed taxpayers have had to claim back £493m (€562m, $698m) from HMRC since April 2015.
This figure prompted Steve Webb, director of policy at Royal London, to say HMRC “is clearly out of control”.
“[HMRC] operates a system of ‘tax first, ask questions later’, presumably so that the government can enjoy some extra interest until the money is claimed back.
“This is a system built around the needs of the Treasury and the bureaucracy, not one which puts people first,” Webb said.
HMRC response
An HMRC spokesperson has responded to Webb’s comments, saying: “We do everything we can to make sure the correct tax is paid so taxpayers are not hit with unexpected tax bills later on”.
The spokesperson told International Adviser that HMRC is committed to making any repayments to individuals as fast as it can.
“Tax refunds from pension flexibility and stamp duty land tax (SDLT) are generally received by the taxpayer within a few weeks of the claim,” the spokesperson said.
Two sources
Royal London said its analysis identified two areas of the tax system where HMRC systematically collects “huge sums in tax”, which it then has to hand back.
The first area is income tax on pension withdrawals, which has resulted in £262m being refunded since April 2015. This is followed by SDLT which has seen £231m in refunds being paid to individuals since April 2016.
The HMRC spokesperson said SDLT was introduced to support home ownership and first-time buyers. They said the government consulted on the SDLT changes before they were introduced to ensure they were introduced in a fair way.
“It costs nothing to apply directly to HMRC for a SDLT refund and HMRC always aims to make any repayments as quick as it can,” the spokesperson said.
