It's the not knowing that kills you - HMRC response times

HMRC customer service (or lack thereof) has been in the news with the release of the Public Accounts Committee (PAC) report for HMRC performance 2022-23. Media coverage has focused on long call-waiting times but there are a number of areas where lack of HMRC resource, complexity of the regime and administrative practices cause clients significant disruption.  

Many clients, especially in the TMT or life science and healthcare sectors, rely on R&D tax credits to provide cash flow. Continuous changes to the regime make budgeting and planning challenging for businesses, while delays in payments can cause hardship. Admittedly, changes were needed to tackle the level of error and fraud in the regime (almost 25% by value of claims in 2020-21 were found to have been non-compliant, with around 10% of all claims showing indicators of fraud). However, uncertain timing of payments (including an occasional complete pause) once claims have been made are undesirable.  

Many client cash runways are particularly tight in the current environment, especially with an increasing trend for tranched funding rounds. Delays in obtaining certainty from HMRC can jeopardise investment. Early stage companies seeking certainty as to the availability of valuable SEIS and EIS reliefs have an unreliable timeline to receive responses on advanced assurances.  The automated response to submissions indicate that HMRC “aim to respond within 15 days” (this is misleading as they actually mean between 15 working days and 40 working days for “complex cases”), but frequently take considerably longer.  Such uncertainty can delay or jeopardise funding or prompt businesses and investors to proceed in anticipation of EIS treatment that does not subsequently materialise.  

Clients will often seek pre-transaction statutory clearances, for example that capital gains tax rollover treatment will not be disciplined on a share exchange be.  In this area tax legislation stipulates a statutory limit of 30 days for HMRC to respond.  There have been concerns raised in the past that spurious questions may be raised by an overstretched HMRC, thereby “restarting the clock”. However, currently HMRC are generally responding well within the statutory limit. 

Transferring shares in UK companies generally involves paying stamp duty or seeking confirmation that no duty is payable.  This process needs to be completed before a company's share registers can be updated and the time taken can cause significant issues with subsequent transactions. The pandemic prompted the introduction of electronic submissions of stamping applications and since then HMRC provide an indication in their automated e-mail response to submissions of expected timings. This is currently around three weeks for simple transfers, but nearly ten weeks for certain reliefs of exemptions. Any attempt to receive updates or guidance from HMRC's “Helpline” is a fool's errand.  

The huge increase in the information provided to and demanded by HMRC from taxpayers and other tax authorities sits in stark contrast to HMRC's inability to deal with matters promptly and within a reliable timeframe, causing clients consternation and frustration. Hopefully the next PAC report will make for more encouraging reading.