HM Revenue and Customs (HMRC) is facing mounting criticism after revelations that some individuals and small businesses are waiting over four months for tax refunds—a stark contrast to the few weeks such processes previously required, according to industry accountants.
The delays, which mainly affect overpayments under the PAYE and Construction Industry Scheme (CIS), come at a time of broader frustration with the tax authority, particularly following its announcement to phase out a free online tax filing service used by small firms.
Nikki Ainscough, managing director of Equilibrium Accountants in York, which supports charities and SMEs, said her clients have experienced significantly longer wait times for refunds due to tax or national insurance overpayments. One client, she noted, may not receive funds until August for a request lodged in March.
A screenshot shared with the Guardian from HMRC confirmed a response would not be issued until 22 August 2025 and that claims from as far back as 10 December 2024 were still being processed.
Ainscough remarked: “I’ve never seen anything like this in 12 years of running my firm. If cashflow is tight, this kind of delay can be devastating.”
She warned that the backlog suggests a high volume of unpaid refunds owed to small businesses and individuals at a time when financial pressures remain acute.
Refund Delays and Staff Shortages Raise Questions
HMRC’s refund tracking tool shows self-assessment claims are moving slightly faster, but still face significant processing times.
One client due over £1,000, based on a 24 April submission, has been told to expect a reply by 15 June—and potentially another 12 weeks before payment is issued.
The backlog has reportedly been worsened by industrial action affecting HMRC staff working on PAYE and CIS refunds.
A spokesperson said: “We’re addressing the issue by allocating more staff to deal with these claims,” and insisted that most do not require further verification.
Despite these issues, HMRC claims customer satisfaction remains at 80%, and that its latest funding allocation will allow it to meet service standards in the 2025–26 fiscal year.
Closure of Free Tax Filing Tool Sparks Anger Among SMEs
In a separate development, HMRC confirmed it will shut down its free company tax filing service in March 2026, forcing small businesses to turn to paid third-party software.
The current tool allows simple submission of annual accounts and corporation tax returns, and has been popular among sole traders and microbusinesses.
HMRC justified the move by stating the tool no longer complies with “modern digital standards” or recent changes in company law.
From April 2026, businesses will need to pay for commercial software—some priced from £15 per month, while other packages may cost over £100.
One business owner told the Guardian: “We now have to pay for the privilege of paying corporation tax. It feels like a backwards step.”
Ainscough echoed those concerns, arguing HMRC has opted not to invest in maintaining the platform, instead leaving the market to software firms—some of which, she said, are “cashing in” on the change.
HMRC responded: “The transitional service, introduced in 2015, was designed to ease the switch to online filing when limited options existed. Now that a competitive software market is in place, it’s the right time to close this outdated system. We’ve published detailed guidance to help businesses prepare.”
