Small business owners are losing money because of a backlog of fraud cases at HMRC, The i Paper can reveal.
Chas Brooke, the owner of an alpaca farm, has not been able to file his VAT return since July, costing him as much as £5,000 in reimbursement.
HMRC told him it will take six months for the issue to be resolved due to a huge volume of fraudulent claims and a shortage of staff.
After The i Paper contacted HMRC, a spokesperson said it had now fixed the issue with Mr Brooke’s account so that he can file his returns.
The PCS union, which represents staff at HMRC, said it had “longstanding concerns” about employee workloads and plans for cuts to staff in some departments.
This is not the first time tax accounts have been compromised by fraudsters. In June, senior officials at HMRC told MPs it lost £47m after a phishing scam affected 100,000 personal tax accounts.
Angela MacDonald, HMRC’s deputy chief executive and second permanent secretary, told MPs on the Treasury Select Committee that criminals were taking customers’ credentials and masquerading as them to get into HMRC accounts.
John-Paul Marks, HMRC’s chief executive, said an investigation into the matter took place last year “including jurisdictions outside the UK” and led to arrests.
A source at HMRC said these cases had been cleared and are not contributing to the current backlog.
Chas Brooke with one of their alpacas, and with his wife Rachel Hebditch and yarn they make from the fleeceMr Brooke, 77, from Tiverton in Devon, said a fraudster accessed the account he uses to file his VAT returns, changed his bank details and put a claim in for a rebate of £31,000.
After numerous complaints to HMRC he claims a helpline staff member told him last week that there was a backlog of more than 160,000 fraud cases and a shortage of staff to process them.
A source at HMRC did not dispute the existence of a backlog but said the 160,000 figure was wrong.
He was told it would take six months to clear the backlog and he should phone back again in January if the issue is not resolved by then.
Mr Brooke called the situation “completely bonkers”, adding: “It’s unbelievable. I spent hours on this, on phones, waiting in line to get to a human being, and then at the end of the day they say, ‘Well, I’m very sorry we can’t do anything about it.'”
In the meantime, he says he has been receiving threatening letters from HMRC for failing to file his returns, including a demand to pay a £2,500 fine.
Businesses are required to tell HMRC how much VAT they have charged and how much they have paid to other businesses. Depending on the sums, they could either owe money or get to claim some back.
Staff on HMRC’s helpline have told Mr Brooke to ignore the letters about the fines, which are automatically generated by their system.
He said he was owed between £3,000 and £5,000 in VAT, a big sum for a small family business, and that the delay is hurting their finances.
He added that HMRC had also admitted to mistakenly sending him a letter in September telling him the issue was resolved and that he could now create a new account to file his return.
Nimesh Shah, chief executive at accountants Blick Rothenberg, said the firm had dealt with a similar case in which a client’s personal tax account had been compromised by fraud, and it took about six months to get resolved.
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He said HMRC had taken a long time to get the old account closed, transfer the records to a new account, and issue a new reference number, and it had required contacting HMRC many times.
“There should be a dedicated team who are looking at this really quickly because any identity theft or fraud with your tax records, whether you’re a business or an individual, is quite concerning,” added Mr Shah.
“This is meant to be a really super-secure government portal, and bluntly, HMRC should be able to divert enough of their resource to take serious action on this.”
He said £3,000 to £5,000 was a significant sum of cash for a small business: “It’s not good enough that they’re saying, ‘Just call back in January. That level of money can put a small business out of business.”
Fran Heathcote, general secretary at the PCS union, said it had “longstanding concerns about workloads in HMRC.
“While PCS helped push the department towards a commitment to recruit 5,500 staff over five years into areas such as compliance and debt management, they are now seeking to reduce numbers elsewhere in the department, keeping staffing at the same overall level.
“In addition to rampant tax avoidance and evasion, chronic underfunding of HMRC has created a massive tax gap.”
A source at HMRC said no account holders would lose money because of fraudulent claims.
A HMRC spokesperson said: “We apologise to Mr Brooke for the disruption this caused to his VAT account. We have resolved the issue and will contact him directly to help reset his security settings.
“Like all major organisations, we are targeted by organised criminals. We are continuously improving our security measures to detect and prevent fraud and we work with law enforcement to catch those responsible.”
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