Up to £391m of taxpayers’ funds could be pocketed by HM Revenue & Customs (HMRC) in what experts have described as a "stealth tax".
HMRC currently holds £391m in “unallocated” deposits from taxpayers who used its Certificate of Tax Deposit scheme between 1975 and 2017, a Freedom of Information request by accountancy RSM has found.
But the taxman has said any deposits that remain unclaimed by 23 November 2023 will be “forfeited” – meaning the entire pot could go straight into the Government’s coffers. Taxpayers were given a six-year warning by HMRC but the deadline is fast approaching and thousands have still not claimed their money.
The data obtained by RSM shows that 2,549 certificate holders have money in the CTD scheme – the vast majority of which, 2,372, are individuals.
On average, they stand to lose over £100,000 each if HMRC takes their deposit.
The CTD scheme was first introduced in 1973 to allow taxpayers to put money aside for a future tax liability. Individuals could use it to allocate money for income tax, capital gains tax and inheritance tax liabilities.
A common use was in tax avoidance cases where the taxpayer could be waiting years before the court reached a decision on whether or not tax was owed.
The taxpayer would not have to pay late payment interest rates, typically charged at 5.5pc, as long as the money was deposited before the tax was due. They also earned daily interest if they held a deposit of £100,000 or more for over a month, up to six years.
The scheme closed its doors to new certificate purchases in November 2017 and HMRC says it will continue to “honour” the existing certificates but only up to November 2023. After this, HMRC will try to repay any unclaimed balance but where it cannot the balance will be considered forfeited. Affected people will be able to ask for a refund even after the deadline.
HMRC has said it will take reasonable efforts to contact and repay certificate holders but provided no definition of what constitutes “reasonable efforts”. If it cannot contact the certificate holders, HMRC will pocket the unclaimed balance.
Noel Mooney of RSM said HMRC will have “no realistic prospect” of contacting many of the certificate holders “due to the passage of time and events such as death, changes of address and leaving the self-assessment system”.
He added: “With the current cost of living crisis there must surely be a clarion call for any monies not claimed to be ring fenced and put towards helping those who are hardest hit by the current crisis, after all it is not HMRC’s money to keep. If not, it just becomes another stealth tax.”
An HMRC spokesman said: "It is utter nonsense to claim the closure of this scheme is ‘a stealth tax raid’. Those with a Certificate of Tax Deposits have been given six years to use them and, even after this deadline, they can submit them to us for a refund.”
“We will also be contacting every holder of a CTD we can identify to ensure they know about this.”