Stamped Duty Rebate

HMRC clamps down on tax rebate rip-off firms

  • Government and HMRC to clamp down on third party tax rebate companies
  • Customers frequently exploited by firms making fraudulent claims
  • Government to legislate to render void assignments of income tax repayments 
  • Email jane.denton@mailonline.co.uk if you’ve been hit by third party rebate firm 

UK taxpayers claiming rebates via third parties will have stronger protections under a major Government shake-up of the way repayment agents can operate.

HM Revenue & Customs said on Wednesday it had frequently seen cases where repayment agents had pushed the boundaries of eligibility, exploited customers or made fraudulent claims. 

The Government is therefore preparing legislation to change how repayment agents are compensated and better protect tax payers.

Clamp down: UK taxpayers claiming rebates via third parties will have stronger protections

HMRC said it received over 2,200 complaints about repayment agents between January 2022 and October 2022. 

The complaints centred on a number of issues, including the use of assignments, which legally transfer the benefit of the taxpayer’s repayments to the agent. 

Many customers have also been conned into wrongly thinking they have been dealing with HMRC, rather than a third party. 

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HOW THIS IS MONEY CAN HELP

In June last year, This is Money reported how taxpayers were being tricked out of thousands of pounds by companies via unauthorised ‘deeds of assignment’. 

There are also instances of taxpayers not being made aware of, or failing to fully understand, terms and conditions.

As a result of such problems, the Government revealed today that it will introduce legislation to change the way repayment agents are paid for their services and better protect customers from the unscrupulous tactics used by some operators.

This includes 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.

Take a look at the Government’s tax refund tool

One of the most straightforward ways to see if you are owed a tax rebate or refund is to use the Government’s online tool.

Using this official online Government tool is free and means you won’t require the use of a third party tax rebate agent. 

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

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 new process, HMRC said, aims to make it easier for taxpayers to stay in control of their repayments.

There will also be a new registration process for repayment agents, to make the agent sector more transparent so customers better understand what they are signing up to.

Further details on the approach to registration for repayment agents will be set out at a future date.

Currently, repayment agents are not required to register with HMRC, so the department’s ability to proactively check they are registered for anti-money laundering supervision and meet other standards is limited.

Updated standards for agents also include greater evidence of customer consent, to ensure that taxpayers better understand the agreement they are entering into, and stricter transparency rules, including a 14-day cooling off period for customers after entering into an arrangement with an agent.

Crucially, affected firms will also be banned from inferring in their adverts that they are acting on behalf of HMRC. 

The plans follow a consultation last summer and form part of steps to tackle problems in the repayment agent market, which is currently an unregulated sector.

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.’

What’s the response been like to these proposals? 

Financial Secretary to the Treasury Victoria Atkins 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.’

Victoria Todd, head of the Low Incomes Tax Reform Group, said: ‘Refund companies have a legitimate role in the tax system, but the practices of some of these companies in recent years have been unacceptable.

Go official: Check out the Government’s online tax rebate tool to see if you are eligible for a refund

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

John Cullinane, director of public policy for the Chartered Institute of Taxation, said: ‘The consumer protection regulatory gap is best met by trying to strengthen and support what the professional bodies do; we should aim for a situation where all advisers are members of professional bodies and where those who behave unacceptably cannot practice if they are expelled from a professional body.

‘We recognise this may require additional scrutiny of professional bodies themselves, though this should be through a body established to have a consumer protection objective, and independent of the state’s need for revenue.’

Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, said: ‘Thousands of people had complained about the way these firms were operating, so better regulation is very welcome.’

She added: ‘Unfortunately, HMRC decided not to look more closely at the level of fees being charged by these firms – which can be as high as 48 per cent. 

‘Given the level of most of these claims, this often ends up being a relatively small sum. However, it runs the risk of mounting to major costs when there are larger rebates involved.

‘It’s worth bearing in mind that income tax rebate firms charge a fortune for jobs you can do yourself, in a matter of minutes, without paying anything – like claiming for working from home relief or the marriage allowance. 

‘If you know you’ll never get round to making a claim, these services can help, but you need to make a conscious decision whether or not to use them, with a full understanding of what it will cost you.’

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