Accountant wants my tax refund to be paid to them

[John Powell]

I am owed around £1000 from HMRC from 3 years ago. I have taken a few days off to try to work out where this money has gone, and if it is still owed to me. My accountant just tells me that HMRC are always late in issuing tax refunds, but 3 years?!
What has rung alarm bells is that I have just rec'd my recent tax return documents from my accountant for signing and my accountant sent me a covering letter to tell me that they will take their fee out of the tax refund from HMRC. I have never given them permission to take control of the tax refund, and I wondered if this was usual.
Their fee is £290, while my tax refund is approx £2500.

 

[AlanJ1]

I am owed around £1000 from HMRC from 3 years ago. I have taken a few days off to try to work out where this money has gone, and if it is still owed to me. My accountant just tells me that HMRC are always late in issuing tax refunds, but 3 years?!
What has rung alarm bells is that I have just rec'd my recent tax return documents from my accountant for signing and my accountant sent me a covering letter to tell me that they will take their fee out of the tax refund from HMRC. I have never given them permission to take control of the tax refund, and I wondered if this was usual.
Their fee is £290, while my tax refund is approx £2500.

Ask them what they are doing/did for the £290?

 

[David Griffiths]

It's not at all unusual for accountants to collect tax refunds and deduct their fees. The alternative is for you to pay the fee to them before the tax return and claim is filed. That's your call but many clients are happy to have it deducted. Whether you have given permission in the past is not relevant as you would be giving permission now.

Members of professional bodies have strict rules to follow in dealing with client money. There has to be a dedicated client money account. They are also not allowed to deduct fees without previous notification to the client. As I said, it's your call. If you don't like it just pay the fee and move on

 

[John Powell]

They have completed my tax return for 06 April 23 to 05 April 24, to be submitted to HMRC this week. Is that excessive?

 

[AlanJ1]

They have completed my tax return for 06 April 23 to 05 April 24, to be submitted to HMRC this week. Is that excessive?

Depends what you agreed too and what you pay for. It is usually set out in the inital documents when you sign with an accountant.

There's no such thing as excessive really as what may be excessive to you may not be for me. All depends on the return itself and what work needs done / been agreed.

 

[Newchodge]

It's not at all unusual for accountants to collect tax refunds and deduct their fees. The alternative is for you to pay the fee to them before the tax return and claim is filed. That's your call but many clients are happy to have it deducted. Whether you have given permission in the past is not relevant as you would be giving permission now.

Members of professional bodies have strict rules to follow in dealing with client money. There has to be a dedicated client money account. They are also not allowed to deduct fees without previous notification to the client. As I said, it's your call. If you don't like it just pay the fee and move on

Will HMRC pay the money to a third party without seeing written evidence of permission?

 

[DWS]

Will HMRC pay the money to a third party without seeing written evidence of permission?

If they are the registered agent then yes HMRC will pay the refund to the accountant

 

[Gyumri]

It's not at all unusual for accountants to collect tax refunds and deduct their fees.

I wouldn't opt for that but it's the OP's choice.

Will HMRC pay the money to a third party without seeing written evidence of permission?

No

If they are the registered agent then yes HMRC will pay the refund to the accountant

An agent is one thing but there is an additional option to specify whether the agent is entitled to receive refunds - is there not any more?

 

[DWS]

I wouldn't opt for that but it's the OP's choice.

No

An agent is one thing but there is an additional option to specify whether the agent is entitled to receive refunds - is there not any more?

Tax advisors bank details go on the ‘if you have paid too much tax’ page and you put X in the nominee box and X in the nominee is your tax advisor box and that’s it.
Don’t forget it is down to the client to sign the tax return they can refuse to sign it if they do not want the refund going to their agent/tax advisor.

 

[John Powell]

I asked why their name and bank details were on the tax form instructing HMRC to pay the tax refund straight to the accountant, and was told they would take the fee and then send the rest to me. Their bank details are on the tax return as the full refund comes to their office, they deduct the accountancy costs and then they will pay the balance to me.
I can understand if I was a late/ bad payer.

 

[DWS]

I am owed around £1000 from HMRC from 3 years ago. I have taken a few days off to try to work out where this money has gone, and if it is still owed to me. My accountant just tells me that HMRC are always late in issuing tax refunds, but 3 years?!
What has rung alarm bells is that I have just rec'd my recent tax return documents from my accountant for signing and my accountant sent me a covering letter to tell me that they will take their fee out of the tax refund from HMRC. I have never given them permission to take control of the tax refund, and I wondered if this was usual.
Their fee is £290, while my tax refund is approx £2500.

Have you checked your Gov Gateway to see the status of the refund? 3 years is very unusual unless HMRC opened an enquiry and it is still ongoing, why have your accountants not chased this up?
If do not want the accountants to have your refund this year then say so and pay them their fee before submission.
I dislike receiving clients refunds and only do it if they are regular clients, I refuse to do it for new clients.

 

[John Powell]

Have you checked your Gov Gateway to see the status of the refund? 3 years is very unusual unless HMRC opened an enquiry and it is still ongoing, why have your accountants not chased this up?
If do not want the accountants to have your refund this year then say so and pay them their fee before submission.
I dislike receiving clients refunds and only do it if they are regular clients, I refuse to do it for new clients.

Thank you, one question: why do you not like receiving clients tax refunds?

 

[John Powell]

Have you checked your Gov Gateway to see the status of the refund? 3 years is very unusual unless HMRC opened an enquiry and it is still ongoing, why have your accountants not chased this up?
If do not want the accountants to have your refund this year then say so and pay them their fee before submission.
I dislike receiving clients refunds and only do it if they are regular clients, I refuse to do it for new clients.

My accountant said that he had chased HMRC and apparently HMRC have not processed the 2021/22 Tax Return

 

[DWS]

Thank you, one question: why do you not like receiving clients tax refunds?

Because I prefer to be paid for my work once it is complete and the tax return submitted, if HMRC opened an enquiry I would have to wait however many months before I get paid, had 2 enquiries this year through no fault of mine or my clients but it still took nearly 6 months for the refund to be sent, so I prefer to be paid once my work is completed.

 

[DWS]

My accountant said that he had chased HMRC and apparently HMRC have not processed the 2021/22 Tax Return

So your accountant is still waiting to be paid?
Have you checked the status on your Gov Gateway to see?

 

[David Griffiths]

Thank you, one question: why do you not like receiving clients tax refunds?

To some degree it's a necessary evil. Receiving the refunds involves maintaining a separate client account (which the bank cannot touch to offset money you may owe them) with detailed rules from our governing institute. Woe betide you if the money goes in to the wrong account, and that applies both ways. Obviously putting client money into your business account is wrong, but putting your money into your client account is also frowned on, even if the mistake is made by one of your staff picking up the wrong paying in book and you correcting the entry immediately it's discovered.

Accountants generally do it to save the client having to pay for the fees before getting the refund - particularly prevelant with construction subcontractors but applies to others as well. It reduces risk that the client will get the refund and then either not pay the fees at all, or take months to do so. So in many cases it's actually a service to the client. If the client doesn't like it, then pay the fee and collect the full refund.

 

[John Powell]

Just spoke to a friend who also uses them, and the accountants insist this is the way they operate from now on. They pushed back, but the accountants dug their heels in, even when the accountants fee was paid.
I thought it was up to the client.

 

[DWS]

Just spoke to a friend who also uses them, and the accountants insist this is the way they operate from now on. They pushed back, but the accountants dug their heels in, even when the accountants fee was paid.
I thought it was up to the client.

It is up to the client!
It is the clients money not the accountants, as long as the fees are paid there is no reason why the accountant should receive the refund, it also creates additional work for the accountant in having to transfer the funds to the client.

 

[Newchodge]

Just spoke to a friend who also uses them, and the accountants insist this is the way they operate from now on. They pushed back, but the accountants dug their heels in, even when the accountants fee was paid.
I thought it was up to the client.

Is the accountant accredited to one of the accountancy bodies? They are:

• Association of Chartered Certified Accountants (ACCA)
• Chartered Accountants Ireland (CAI)
• Chartered Institute of Management Accountants (CIMA)
• Chartered Institute of Public Finance and Accountancy (CIPFA)
• Institute of Chartered Accountants in England and Wales (ICAEW)
• Institute of Chartered Accountants of Scotland (ICAS)

If so, forcing the client to allow them to take the refund may be against their rules. If they are not a member I absolutely would NOT agree to their taking the refund.

 

[John Powell]

Is the accountant accredited to one of the accountancy bodies? They are:

• Association of Chartered Certified Accountants (ACCA)
• Chartered Accountants Ireland (CAI)
• Chartered Institute of Management Accountants (CIMA)
• Chartered Institute of Public Finance and Accountancy (CIPFA)
• Institute of Chartered Accountants in England and Wales (ICAEW)
• Institute of Chartered Accountants of Scotland (ICAS)

If so, forcing the client to allow them to take the refund may be against their rules. If they are not a member I absolutely would NOT agree to their taking the refund.

No, they don't seem to be, the accountants I deal with are FMAAT and MAAT

 

[DWS]

No, they don't seem to be, the accountants I deal with are FMAAT and MAAT

AAT are still a professional body! but it does not matter the point is it is your money not the accountants.
Have you asked why they want the refund in their names if you have already paid their fees?
Or even, if you owe HMRC money will they pay it for you and wait for you to then pay them back!
If they refuse to answer the above I would be questioning their motives as to why they will not let you receive your own refund.

 

[MyAccountantOnline]

I am owed around £1000 from HMRC from 3 years ago. I have taken a few days off to try to work out where this money has gone, and if it is still owed to me. My accountant just tells me that HMRC are always late in issuing tax refunds, but 3 years?!
What has rung alarm bells is that I have just rec'd my recent tax return documents from my accountant for signing and my accountant sent me a covering letter to tell me that they will take their fee out of the tax refund from HMRC. I have never given them permission to take control of the tax refund, and I wondered if this was usual.
Their fee is £290, while my tax refund is approx £2500.

HMRC can be horrendously slow to issue tax refunds but whilst you say the refund is from 3 years ago when was the refund actually requested?

As an accountant I never deduct fees from refunds I dont want the additional admin of holding client funds and sending refunds, it's added time and expense. I dont know how common it is for other accountants to do.

 

[MyAccountantOnline]

Will HMRC pay the money to a third party without seeing written evidence of permission?

Yes I have personal experience of it - in error I was sent a refund (as an individual not in my professional capacity) for a family member! A payable order made payable to me personally. I'd like to hope this isn't typical/usual.

 

[Ziggy2024]

I also don't operate this way but I have worked for reputable firms who do.

Is the accountant accredited to one of the accountancy bodies? They are:

Happy to be proven wrong but I would doubt that it is against the rules of any of those bodies (won't let me post links). It certainly isn't against AAT rules which is the body we are dealing with here. The only rules are that it must be held in a client account and the client must agree to the agent receiving the money on their behalf.

As noted by others you can check whether the refund has been issued. That will be your starting point. HMRC aren't particularly helpful at the best of times but January is certainly not the time to expect a quick response.

 

[Newchodge]

The only rules are that it must be held in a client account and the client must agree to the agent receiving the money on their behalf.

That is what is in dispute. In message #17 the accountant is stating that the refund MUST go to them.

 

[Ziggy2024]

That is what is in dispute. In message #17 the accountant is stating that the refund MUST go to them.

The question was about a previous refund which the OP wonders about.

The terms of business of the accountant are that they receive the refund. If the client signs the terms then they have agreed to that. Sharp practice? Maybe. Legal, yes (although it can be challenged).

 

[Newchodge]

The question was about a previous refund which the OP wonders about.

The terms of business of the accountant are that they receive the refund. If the client signs the terms then they have agreed to that. Sharp practice? Maybe. Legal, yes (although it can be challenged).

I probably agree for new clients. But not for an existing client, at the point when the refund is about to be received!

 

[UK Contractor Accountant]

Accountants generally do it to save the client having to pay for the fees before getting the refund - particularly prevelant with construction subcontractors but applies to others as well. It reduces risk that the client will get the refund and then either not pay the fees at al

had one where we did 4 years accounts & tax returns for cis subcontractor - over £11K tax refund received back from HMRC but subbie removed our bank details for the tax refund at HMRC so our fees of £2K ish still to this day remain unpaid.

 

[Ziggy2024]

I probably agree for new clients. But not for an existing client, at the point when the refund is about to be received!

Exactly when an unscrupulous client will disappear! This accountant may very well have been burned and has therefore changed the way they work.

It shouldn't be the first the client hears of it - I completely agree but this may have been communicated and OP missed it.

 

[David Griffiths]

I probably agree for new clients. But not for an existing client, at the point when the refund is about to be received!

It's not practical to have different payment conditions for different clients. If your rule is that clients must pay before their accounts or tax returns are submitted, then that has to apply to everybody. Otherwise you are effectively saying to some clients that we don't trust you as much as some other clients.

So quite simple, pay before submit or allow us to collect the tax refund to recover the fees. Even then as UK Contractor Accountant says some dishonest people can rob you, Once.

 

[DWS]

It's not practical to have different payment conditions for different clients. If your rule is that clients must pay before their accounts or tax returns are submitted, then that has to apply to everybody. Otherwise you are effectively saying to some clients that we don't trust you as much as some other clients.

I disagree, it is not impractical at all, it is my business and I decide how I want to be paid, as I said upthread all my new clients have to pay before I submit but I still have some existing clients where the refund comes to me and I take my fee before passing the remainder to them, if potential clients do not like it then they are more than welcome to go elsewhere.

 

[Newchodge]

It's not practical to have different payment conditions for different clients. If your rule is that clients must pay before their accounts or tax returns are submitted, then that has to apply to everybody. Otherwise you are effectively saying to some clients that we don't trust you as much as some other clients.

So quite simple, pay before submit or allow us to collect the tax refund to recover the fees. Even then as UK Contractor Accountant says some dishonest people can rob you, Once.

I don't have a problem with that as all clients are advised of the condition from the outset and can choose to accept or go elsewhere. Here, the client appears to have had no concept that it may happen unitl a refund was likely.

 

[John Powell]

I don't have a problem with that as all clients are advised of the condition from the outset and can choose to accept or go elsewhere. Here, the client appears to have had no concept that it may happen unitl a refund was likely.

Thank you, yes, I insisted that as I pay the accountant on receipt of the invoice, as I always have done, I would prefer not to have my tax refund from HMRC go to my accountants first. Also I have an ongoing issue with HMRC not paying tax refunds (going back a few years which is the subject of a complaint) by having my accountants bank account number on the HMRC website would further muddy the waters.

 

[John Powell]

HMRC can be horrendously slow to issue tax refunds but whilst you say the refund is from 3 years ago when was the refund actually requested?

As an accountant I never deduct fees from refunds I dont want the additional admin of holding client funds and sending refunds, it's added time and expense. I dont know how common it is for other accountants to do.

Hi,
The overpayment of tax is on the HMRC website, and has shown differing amounts over the last 3 years, each time I have requested it to be paid - months go by and nothing... luckily I printed out the claim forms, so have I the dates and the ref numbers. I recently put in a complaint to HMRC about this, so I'm awaiting their response.

 

[John Powell]

I don't have a problem with that as all clients are advised of the condition from the outset and can choose to accept or go elsewhere. Here, the client appears to have had no concept that it may happen unitl a refund was likely.

That's true, I had no idea until I was checking my tax return and saw the relevant boxes checked. This is the first year this has happened and I had no prior warning.

 

[DWS]

Hi,
The overpayment of tax is on the HMRC website, and has shown differing amounts over the last 3 years, each time I have requested it to be paid - months go by and nothing... luckily I printed out the claim forms, so have I the dates and the ref numbers. I recently put in a complaint to HMRC about this, so I'm awaiting their response.

If you request it via your Gov Gateway it does not always pull through, sometimes it takes manual intervention from HMRC, one phone call and they process it straight away, I must do this at least 5 times a year for my clients otherwise it just sits there and never gets paid out.

 

[John Powell]

My concern is that if HMRC do not pay the accountant my tax refund in a timely manner, I would still have to pay the invoice, as stated in my accountants letter, no deadline is mentioned. Also if HMRC didn't pay up for months, or years in my case, then I would have paid the accountants the invoice, and then the accountant would still receive my tax refund, but what if the accountant went bust in the meantime or stopped trading?

 

[DWS]

My concern is that if HMRC do not pay the accountant my tax refund in a timely manner, I would still have to pay the invoice, as stated in my accountants letter, no deadline is mentioned. Also if HMRC didn't pay up for months, or years in my case, then I would have paid the accountants the invoice, and then the accountant would still receive my tax refund, but what if the accountant went bust in the meantime or stopped trading?

Speak to the Accountant, ask why they want the invoice paid as well as receiving the refund, doesn’t make sense to me.
They should do one or the other not both.