HMRC to act against ‘unscrupulous tactics’ used by tax agents

It follows concerns scores of people were seeing their genuine tax returns being sent to third party tax agents despite no 'official' contract being signed.

HMRC (HM Revenue and Customs) will introduce new legislation to change the way repayment agents are paid for their services, and better protect customers from what it says is ‘the unscrupulous tactics used by some operators’. 

This means stopping the use of legally binding ‘assignments’ as part of claiming an Income Tax repayment, which could only be cancelled if the agent and taxpayer both agreed to do so.

This can be challenging for customers who become dissatisfied with their agent, or who simply wish to take over managing their own claim. 

In an investigation in 2022, we revealed how a Blackburn woman said she had "no idea" how a cheque from HMRC was sent to another company, Tax Credits Ltd.

The woman, named Jessica, said she was contacted on March 10 by post, receiving an official HMRC letter stating she would be paid back £60.

When she later contacted HMRC to find out when she would be paid, she was told a cheque had been sent to a company called Tax Credits Limited.

Why is HMRC paying tax returns to a 'mystery company?'

Since then, dozens of people from across the UK contacted the Lancashire Telegraph detailing how they have lost hundreds and thousands of pounds.

There was anger and frustration at how HMRC continues to pay the company despite customer complaints. This despite, at the time there being no registered office address for the company and no contactable phone number.

HMRC was asked several times to clarify if payments were still being made to the company that customers could not speak too but said it "could not comment on identifiable businesses or individuals".

Instead, it said customers "wishing to cancel an assignment with a repayment agent must take this up with the company, as it is a legal agreement between the two parties and HMRC is not a party to it".

Under new arrangements, if a taxpayer chooses to use a repayment agent to reclaim overpaid tax and wants it sent to the agent, they will need to make a nomination, which they can cancel at any time.

The HMRC says the new process will make it easier for taxpayers to stay in control of their repayments.

‘Disgust, shock and anger’ after HMRC pays out money to ‘mystery firm’

Angela MacDonald, HMRC’s Deputy Chief Executive and Second Permanent Secretary, said: “Taxpayers deserve better – we want to make sure they are better protected before choosing to enter into an agreement with a repayment agent.

"HMRC’s updated standards for agents will level the playing field and provide the benchmark we expect all repayment agents to meet.”

The changes follow HMRC’s consultation last summer on ‘Raising standards in tax advice: Protecting customers claiming tax repayments’.

Responses to the consultation highlighted the need to 'improve agent transparency and standards with the overall aim of better protection for taxpayers'. 

As a result, HMRC is today (Wednesday, Janaury 11) also setting out an updated standards for agents – applicable to all tax agents and include greater transparency requirements and a new HMRC registration process for repayment agents – to make the agent sector more transparent so customers better understand what they are signing up to.

The new standard will mean that greater evidence of customer consent is required so taxpayers better understand the agreement they have entered into.

There will also be stricter transparency rules, including introducing a 14-day ‘cooling off’ period for customers after entering into an arrangement with an agent, and an obligation on agents to ensure all communications and advertising material are fair, clear, accurate and do not mislead or conceal material facts.

These changes form part of the government’s commitment to tackle problems in the repayment agent market, which was described as an 'unregulated sector'. 

Victoria Atkins, Financial Secretary to the Treasury, said: “For too long taxpayers have been left in the dark as a result of misleading and opaque agreements with repayment agents.

"These new measures will ensure those who are entitled to claim a tax repayment or relief can do so freely and easily – whether they choose to do this themselves or by using an agent.

“This Government is making it easier to navigate the system for all taxpayers using an agent to claim money that’s owed to them.”

Victoria Todd, Head of the Low Incomes Tax Reform Group, said: “We welcome these additional steps, which show HMRC recognises the important role they play in consumer protection.

"Refund companies have a legitimate role in the tax system, but the practices of some of these companies in recent years have been unacceptable.

"The proposed changes will hopefully address problems around the use of assignments, increase transparency for taxpayers and set clearer standards for these companies’ behaviour.  

“Alongside this, it is important that more effort goes into raising awareness of refunds and ensuring it is as simple as possible for taxpayers to access them. We look forward to working with HMRC on the detail of the proposals.”

If taxpayers think they are owed a tax rebate, they can claim directly from HMRC via the free and secure service on GOV.UK and will receive 100 per cent of the money owed.