Don’t get ripped off, check what a ‘deed of assignment’ for a tax repayment covers
06 July 2021
It can be stressful at times for even a represented taxpayer to deal with HMRC. It may be much more so for an unrepresented taxpayer, who only deals with HMRC on very rare occasions. We recently highlighted the potential risks for people who rely on unqualified ‘finfluencers’ to get advice.
Other taxpayers who are entitled to repayments turn to tax refund companies. This is not necessarily a problem and may be a sensible option for those who find the HMRC systems too complex or intimidating. The way such firms often work is that the taxpayer signs a deed of assignment so that the refund is paid to the claim company. The company then deducts its fee, often a percentage of the refund, and passes the balance on to the taxpayer.
Recently the Low Incomes Tax Reform Group (LITRG) highlighted a rise in reports of problems. Some deeds of appointment do not specify that the deed relates solely to the specific repayment. As a result a subsequent repayment or a series of repayments relating to earlier years may be paid to the company, and a fee deducted, so the taxpayer doesn’t receive the full refund.
The ‘deed’ may be hidden in the terms and conditions when someone signs up for the agent, or appear as a simple part of the wording in a document, so the taxpayer may not be aware they have signed up to an agreement spanning multiple years, possibly even future ones.
Those who have already signed up with a tax refund company should check the deed they have signed and, if it covers more than they expected, have it removed. Some companies will actually charge to remove the deed. The LITRG has produced a guide on how to identify and have an incorrect deed removed.
It is very concerning that people can potentially be caught out by such practises, especially in the current financial climate, where the individuals affected are often likely to be the most vulnerable. HMRC needs to review its policy on accepting deeds in cases where it is not absolutely clear whether the taxpayer understands what they have signed. Even better, the tax reclaim system should be simplified, so that people with straightforward tax affairs don’t need outside help to reclaim tax.
Other taxpayers who are entitled to repayments turn to tax refund companies. This is not necessarily a problem and may be a sensible option for those who find the HMRC systems too complex or intimidating. The way such firms often work is that the taxpayer signs a deed of assignment so that the refund is paid to the claim company. The company then deducts its fee, often a percentage of the refund, and passes the balance on to the taxpayer.
Recently the Low Incomes Tax Reform Group (LITRG) highlighted a rise in reports of problems. Some deeds of appointment do not specify that the deed relates solely to the specific repayment. As a result a subsequent repayment or a series of repayments relating to earlier years may be paid to the company, and a fee deducted, so the taxpayer doesn’t receive the full refund.
The ‘deed’ may be hidden in the terms and conditions when someone signs up for the agent, or appear as a simple part of the wording in a document, so the taxpayer may not be aware they have signed up to an agreement spanning multiple years, possibly even future ones.
Those who have already signed up with a tax refund company should check the deed they have signed and, if it covers more than they expected, have it removed. Some companies will actually charge to remove the deed. The LITRG has produced a guide on how to identify and have an incorrect deed removed.
It is very concerning that people can potentially be caught out by such practises, especially in the current financial climate, where the individuals affected are often likely to be the most vulnerable. HMRC needs to review its policy on accepting deeds in cases where it is not absolutely clear whether the taxpayer understands what they have signed. Even better, the tax reclaim system should be simplified, so that people with straightforward tax affairs don’t need outside help to reclaim tax.
