HMRC bans tax repayment agency
21 February 2023
HMRC announced last month that the government intends to change the law so that, 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.
Currently many agents use assignments, which are legally binding unless both sides agreed to end them. This has sometimes led to disputes about what the agency should charge for, whilst also making it hard for taxpayers to change agencies.
Repayment agencies are used by taxpayers to reclaim tax from HMRC. They deal directly with HMRC on behalf of their clients, often in return for a percentage of the amount repaid. Some taxpayers find them more convenient than using an accountant or dealing with HMRC themselves. However, whilst repayment agents may assist taxpayers who might find it difficult to claim amounts from HMRC, there are concerns around consumer protection and the impact on HMRC of having to deal with a high volume of speculative claims.
In the case of Tax Credits Ltd, the problem was a failure to apply the anti-money laundering checks required of so many businesses, to prevent them being used to wash the proceeds of crime or fund terrorism. The agency is no longer allowed to trade as a repayment agency, or they will be criminally charged.
During the checks into the agency, some 11,000 taxpayers’ reclaims were delayed. HMRC advises these will now be repaid directly from HMRC, and they should hear from them by the end of March without the need to pursue them. This will undoubtedly be a great relief to people who had hoped for a quick, simple tax refund.
Repayment agencies can fill an important role in the tax system, helping many people deal with their relatively simple tax affairs if they are not comfortable liaising directly with HMRC. These taxpayers need to be protected as they are likely to be less tax aware than other taxpayers. It is encouraging to see HMRC stepping up to the mark and taking more action where appropriate.
Currently many agents use assignments, which are legally binding unless both sides agreed to end them. This has sometimes led to disputes about what the agency should charge for, whilst also making it hard for taxpayers to change agencies.
Repayment agencies are used by taxpayers to reclaim tax from HMRC. They deal directly with HMRC on behalf of their clients, often in return for a percentage of the amount repaid. Some taxpayers find them more convenient than using an accountant or dealing with HMRC themselves. However, whilst repayment agents may assist taxpayers who might find it difficult to claim amounts from HMRC, there are concerns around consumer protection and the impact on HMRC of having to deal with a high volume of speculative claims.
In the case of Tax Credits Ltd, the problem was a failure to apply the anti-money laundering checks required of so many businesses, to prevent them being used to wash the proceeds of crime or fund terrorism. The agency is no longer allowed to trade as a repayment agency, or they will be criminally charged.
During the checks into the agency, some 11,000 taxpayers’ reclaims were delayed. HMRC advises these will now be repaid directly from HMRC, and they should hear from them by the end of March without the need to pursue them. This will undoubtedly be a great relief to people who had hoped for a quick, simple tax refund.
Repayment agencies can fill an important role in the tax system, helping many people deal with their relatively simple tax affairs if they are not comfortable liaising directly with HMRC. These taxpayers need to be protected as they are likely to be less tax aware than other taxpayers. It is encouraging to see HMRC stepping up to the mark and taking more action where appropriate.
