Raising standards in tax advice: protecting customers claiming tax repayments

Q: Annex A: Relevant (current) government legislation

Law of Property Act 1925, section 136 . Judicature (Northern Ireland) Act 1978, section 87 . Transmission of Moveable Property (Scotland) Act 1862 . Footnotes [1] In some cases, such as Research & Development relief, it is technically an outright payment rather than a ‘repayment’. The term repayment is used for simplicity, as the underlying business model is the same across all taxes and reliefs. [2] There has been frequent media attention surrounding both fees and assignments, including a Which article , Guardian article , and segments on The One Show and Rip Off Britain (04/02/22). there is also the Low Income Tax Reform Group (LITRG) press release

Question 1

Scope of this consultation

Accepted Answer

This consultation seeks views on whether HMRC should:

restrict the use of assignments
introduce measures designed to ensure taxpayers see material information about a repayment agent’s service before entering into a contractual agreement
require repayment agents to formally register with HMRC

Question 2

Who should read this

Accepted Answer

This consultation will be of interest to:

individuals who have claimed or considered claiming tax refunds through repayment agents
individuals who have seen adverts from repayment agents
all tax agents, particularly those specialising in helping taxpayers claim repayments
charitable organisations and consumer groups
accountancy professional bodies

Question 3

Duration

Accepted Answer

This consultation will run for 12 weeks, from 22 June to 14 September 2022.

Question 4

Lead official

Accepted Answer

Alex Beer, HMRC

Question 5

How to respond or enquire about this consultation

Accepted Answer

Written responses can be made:

by email to repaymentsconsultation@hmrc.gov.uk
by survey
by post:

Raising standards in tax advice: Protecting customers claiming tax repayments,
Agent Policy Team,
HMRC,
14 Westfield Avenue,
Stratford,
London,
E20 1HZ.

Question 6

Additional ways to be involved

Accepted Answer

HMRC will be holding a limited number of meetings with interested parties. Please email if you would like to be included.

Question 7

After the consultation

Accepted Answer

HMRC will publish a summary of responses as soon as possible after the consultation period.

Question 8

Getting to this stage

Accepted Answer

In March 2020, the government published the call for evidence raising standards in the tax advice market, which closed in August 2020. The summary of responses and next steps was published in November 2020, which stated that government would review options to tackle the high cost to consumers of claiming tax refunds.

In March 2021 the government held a subsequent consultation raising standards in the tax advice market: professional indemnity insurance and defining tax advice, and the summary of responses published in November 2021 confirmed that it would consult in 2022 on ways to tackle the high costs to taxpayers of claiming tax refunds.

HMRC has held information discussions with interested stakeholders in 2022, in which issues in the repayment agent market have been discussed.

Question 9

Previous engagement

Accepted Answer

The government published research exploring the motivations and experiences of taxpayers using repayment agents to claim tax rebates in November 2021.

Question 10

Ministerial foreword

Accepted Answer

The government is keen to ensure that taxpayers pay the right amount of tax, and, where they are entitled to a refund, can access this easily.

The government is aware that some taxpayers face issues and feel misled when using agents that specialise in claiming tax refunds from HMRC. Repayment agents can provide a useful service to taxpayers, supporting them to make claims for repayments of tax where this is due.

However, HMRC has received increasing numbers of complaints from customers who have used ‘repayment agents.’ Additionally stakeholders have raised concerns about consumer protection in the repayment agent market directly with government and in the media.

Issues they have raised include:

the use of assignments, which legally transfer the benefit of the taxpayer’s repayments to the agent
taxpayers not being made aware of or fully understand the terms and conditions to which they are agreeing
taxpayers being unaware that they are dealing with a third party and not HMRC

HMRC has also seen large numbers of ineligible claims made by some repayment agents, which delays the processing of genuine claims.

At Tax Administration and Maintenance Day 2021, the government announced that it would consult on tackling the high cost to taxpayers of claiming tax refunds. The government is therefore seeking views in this consultation on potential measures to help taxpayers make informed decisions about whether to use a repayment agent, to restrict the use of assignments, and to require repayment agents to formally register with HMRC.

This consultation is part of the government’s agenda to raise standards in the market for tax advice, and is linked to the recently published HMRC review of its powers to uphold the Standard for Agents and the forthcoming consultation on the wider regulatory framework for the provision of tax services.

In addition to raising standards in the wider market for tax advice, the government recognises the unique issues associated with repayment agents and considers more targeted action is needed to tackle these issues.

Lucy Frazer, Financial Secretary to the Treasury

Question 11

1.  Executive summary

Accepted Answer

This consultation is seeking views on measures intended to protect individuals who use repayment agents to claim a tax refund, in particular relating to Income Tax.

It details potential proposals to restrict the use of assignments, a form of property law which is used to transfer the benefit of a taxpayer’s repayments to the agent.

It also seeks views on whether HMRC should introduce measures to ensure taxpayers see the information they need to make an informed decision about whether to use a repayment agent, and whether HMRC should require businesses specialising in repayments to formally register with HMRC.

Chapter 2 introduces the background to the repayment agent market, why repayments occur, and outlines the scope of the consultation.

Chapter 3 sets out the government’s understanding of the reasons why individuals use repayment agents, with supporting research. It also outlines HMRC’s efforts to make it easy for taxpayers to claim repayments directly from HMRC, and to raise awareness that they can do so.

Chapter 4 expands on the consumer protection issues seen in the repayment agent market, and outlines HMRC’s current approach to addressing these issues.

Chapter 5 seeks views on options to go further, including whether and how HMRC should ensure repayment agents display material information to prospective clients in line with existing rules for financial services, whether HMRC should restrict the use of assignments, and whether HMRC should require repayment agents to formally register before HMRC so their credentials can be checked and action can be taken more swiftly where poor practices are identified.

We will publish a summary of responses within 12 weeks of the consultation ending, which is 7 December 2022.

Question 12

2.  Introduction

Accepted Answer

There are many situations in which HMRC might pay out money. These generally occur where an individual or business has paid too much tax, or if they qualify for a tax relief. In some cases, payment is automatic, and in others it requires a claim to HMRC.[1]

Individuals and businesses can make a claim directly to HMRC without the need for a third party. HMRC has introduced new digital services to help individuals claim quickly and easily, and claiming directly ensures taxpayers receive their full entitlement.

However, many taxpayers decide to seek help with their claim. This can be at no cost, for example from a family member, or for a fee from a tax adviser or agent. Common reasons individuals use a third party are that they were not aware they could claim directly that they did not want to deal directly with HMRC, or that they thought it would be too complex to claim directly.

While it is common for tax advisers and agents to undertake work that results in a repayment, HMRC has seen a growth in businesses that specialise in helping taxpayers and businesses make claims to HMRC that result in a tax repayment as their main service, without providing wider tax or accountancy services.

These businesses, which can be described as repayment agents, are often virtual, advertising on social media, and tend to operate a no-win no-fee commission-based structure with large volumes of relatively low value claims. They can have a significant effect on HMRC’s ability to meet its expected service levels – frequently sending in thousands of claims at one time which causes backlogs and delays.

Repayment agents operate across most taxes and reliefs where a repayment can be generated, including Income Tax, Corporation Tax (for example, Research and Development (R&D) relief), and Stamp Duty Land Tax (SDLT).

Recent consultations on R&D and SDLT have highlighted poor practice among agents specialising in making claims for relief in these areas.

This consultation focuses on claims relating to Income Tax reliefs as these are areas where HMRC has seen potential harm to individuals and where volumes are significant (in 2020 to 2021, HMRC received more than 380,000 employment expense claims from repayment agents). However, where the potential measures may have a wider application than Income Tax, we will consider extending them.

This consultation outlines potential measures to address 3 key issues:

that taxpayers do not always know what they are signing up to as a result of repayment agents not making this information clear
the use of assignments, whereby the right to the repayment legally transfers from the taxpayer to the agent.
high volumes of claims where no repayment is due, resulting in delays processing genuine claims more quickly.

The measures concerning making information clear to consumers are intended to bring tax repayment services in line with existing expectations for other financial advice interactions.

Many taxpayers value the service repayment agents provide, understand and accept the fee structure, and are repeat users. Not all repayment agents create consumer protection risks. The government recognises this and does not want to prevent taxpayers who want to use repayment agents from doing so. The potential measures in this consultation are not intended to have that effect but rather tackle the specific problems identified.

The government welcomes views on both the issues and measures outlined in this consultation. In addition to written responses, HMRC intends to hold a number of roundtable discussions with interested stakeholders. Please contact us if you would like to be involved. We have also introduced a survey with the intent of making it easier for taxpayers who may not be familiar with the consultation process to respond.

Question 13

3.  Why individuals use repayment agents and how HMRC is making it easy to claim directly

Accepted Answer

HMRC commissioned Kantar to undertake qualitative research exploring the motivations and experiences of taxpayers who have used repayment agents, published under the title The use of High Volume Agents to claim tax rebates (hereafter: ‘the Kantar research’). This involved in-depth interviews with 30 taxpayers. These findings correspond with feedback from external stakeholders, including charitable organisations, as well as internal complaints data and operational experience.

Research identified a perception that claiming directly from HMRC and that finding the relevant information and claim form on GOV.UK would be difficult, so opted to use a repayment agent. This also found that ‘taxpayers decided to use repayment agents for a range of other reasons, including:

the opportunity to receive some money without needing to put in much effort
having financial worries or pressures which encourage them to seek out opportunities for financial reimbursements
hearing of colleagues or friends and family who successfully used a [repayment agent]
the perception that the [repayment agent] is skilled and therefore capable of helping them make a successful claim
believing that the repayment agent is HMRC
a lack of awareness of the option to claim directly to HMRC’

Kantar identified 4 typologies of repayment agent customers:

opportunists: who saw an advert and decided to ‘give it a go’ as they had nothing to lose from making a claim
time optimisers: who were confident and capable of applying directly to HMRC but chose to use a repayment agent because they wanted a hassle-free claim process that they could complete quickly and easily
financial and language barrier customers: who faced barriers to claiming directly, and those in financial difficulties who needed extra income
uncertain customers: who either lacked confidence in their ability to claim directly or were unaware that there was an option of applying directly to HMRC; this group includes older customers and/or those with lower incomes

This research found that amongst 3 of the 4 typologies (‘opportunists’, ‘financial/language barrier customers’ and ‘uncertain customers’) there was a generally low level of understanding of the fees and other terms of service they were signing up to.

During Kantar’s research, many participants who ‘found out during the interview that they could claim directly from HMRC would prefer to do this for any future claims to avoid paying commission’ with the caveat that ‘if applying directly to HMRC proved difficult or complicated, they would prefer to claim via a [repayment agent] again, as they expected that to be an easier process’.

HMRC wants to make it as simple as possible for taxpayers to claim reliefs and repayments and has introduced digital services that enable taxpayers to claim online directly for simple expenses. Taxpayers can claim Income Tax reliefs.

HMRC runs communication campaigns designed to raise awareness that individuals may be eligible for reliefs, and that it is simple to claim. HMRC’s press releases are frequently picked up in national media and by consumer advocate groups. For example, a major communications campaign concerning Working from Home tax relief in October 2020 corresponded with a tenfold increase in the volume of claims in the following 2 weeks, and more than one million applications within 4 weeks. More than 3.5 million claims for Working from Home tax relief have been made via the digital service.

Questions

Question 1: What more could HMRC do to make taxpayers aware that they may be eligible for reliefs, and that they can claim directly from HMRC?

Question 2: What improvements to the process of claiming reliefs could HMRC make that might encourage taxpayers to claim directly?

Question 14

4.  Issues in the repayment agent market and action HMRC is taking

Accepted Answer

Taxpayers, charities, and consumer groups have raised concerns about consumer protection issues relating to repayment agents. HMRC has seen issues arise through formal complaints regarding repayment agents, operational experience, and externally commissioned research. There are 3 main areas of concern:

misleading advertising and lack of transparency about services provided and terms and conditions
repayments being made to third parties rather than the taxpayer, in particular the use of assignments
high volume of speculative claims where no repayment is due, resulting in delays processing genuine claims more quickly

Not all repayment agents display insufficient information about their terms and conditions, exploit the use of assignments, or submit high volumes of ineligible claims. However, these practices are frequently observed and HMRC is already taking action to tackle these issues.

Some repayment agents ask customers to share their personal online credentials, which is a breach of HMRC’s online terms and conditions and is a fraud risk. HMRC has launched a communications campaign to make customers aware that they should not share their personal credentials with their agent.

Misleading advertising, lack of transparency about services provided and terms and conditions

There is strong evidence [2] that many taxpayers who use repayment agents do not understand the terms they are signing up to and feel misled and angry when they later do. These issues primarily arise where taxpayers:

think they are dealing with HMRC rather than a third party
are not aware that the agent will charge a fee at all, or the basis on which they will be charged
are not aware that an assignment will be used at all, or if they are, do not understand what it means in practice, including that the wording typically covers more than the claim made by the agent.
are unaware or do not understand that they cannot unilaterally rescind an assignment once it is in place. Some repayment agents will refuse to revoke an assignment, while others charge a fee for doing so

Some repayment agent practices are arguably misleading, either actively or by omission. This includes:

trading names that taxpayers may associate with HMRC
using the teal colour scheme associated with HMRC or logos associated with government more widely
not prominently displaying information about fees and assignments on their websites or adverts. In some cases, this information is only present in the terms and conditions, which is often in very small text at the end of a webpage
within the terms and conditions, material information is often not prominent
ambiguous or unclear language in terms and conditions, particularly regarding assignments

Typical case study/complaint

Dion sees an advert on Instagram stating that he is due a tax refund of £312 if he worked from home during the pandemic. The trading name of the advertiser is a phrase associated with a function administered by HMRC, and the colour scheme used is similar to the teal used by HMRC.

Dion clicks the link which takes him directly to a form asking whether he worked from home, has paid tax for the relevant year, and claimed the expense already. It also asks for some contact details and his employer’s name.

Dion fills in the information, and hits submit to generate a form to be posted to him that he will complete and send back to the company. At this point, he has seen no information on fees or the presence of an assignment.

Dion receives the posted form, which looks official. The covering letter does not explicitly state there will be a fee or a charge. He completes and returns the form.

Dion is unhappy when he subsequently receives a cheque for around £30, which is much less than the £312 he was expecting (this is because the £312 is paid at the rate at which tax is paid; if you pay the 20% basic rate you would get £62.40 if you claimed directly, subtracting 48% of this in fees is £29.95). He is also not sure why he wasn’t paid his refund directly.

Repayment agents can submit claims to HMRC without being formally authorised by their client in HMRC’s systems. This is known as a ‘filing only’ agent. In these cases, taxpayers can have no visibility that the claim has been made until, and if, they are informed they are due a repayment.

Action HMRC is taking

HMRC expects all agents to adhere to the HMRC Standard for Agents, including repayment agents. Where a tax agent has breached the agent standard and HMRC engagement does not achieve voluntary behaviour change, or where the poor behaviour is so serious that swift action is required, there are several formal powers HMRC can use.

HMRC contacts any agent identified as using HMRC branding, providing factually incorrect information, or who makes false statements about their relationship with us and require them to change the wording. If they do not comply, HMRC can stop processing their claims. This is, however, a fast-paced market with low barriers to entry and so monitoring the changing and unregistered agent population is challenging.

The use of assignments

HMRC is sometimes asked to make repayments to a third party rather than directly to the taxpayer. This can be via a ‘nomination’ which is not legally binding and for which HMRC produces a standard format, or via an ‘assignment’ which is legally binding and for which there is no standard format.

Assignments involve the transfer of personal rights over property from one entity to another, which can include intangible property such as the right to a tax repayment. In the case of repayment agents, this involves an individual transferring their rights to tax repayments to the repayment agent. This means that where a repayment is subsequently issued, it legally belongs to the repayment agent, whom HMRC is obliged to pay. Assignments cannot include future tax years as only overpayments of tax due at the date of the assignment can be included. Once an assignment has been signed, it cannot be unilaterally rescinded by the taxpayer, as the repayment agent is now the legal owner.

The legislative basis for assignments for England and Wales is the Law of Property Act 1925 (section136), for Northern Ireland the Judicature (Northern Ireland) Act 1978 (section 87), and for Scotland the Transmission of Moveable Property (Scotland) Act 1862 alongside a basis in common law.

HMRC believes there are 2 main reasons why some repayment agents use assignments:

it guarantees payment of their fees, as they receive the money directly from HMRC and are able to deduct their fee before sending the balance to the taxpayer. This reduces the risk to the agent that their client does not pay the fee for the service
broadly-worded assignments, typically covering the past 4 years rather than the specific claim made, may, depending on interpretation, enable the agent to benefit from any other repayment owed to the taxpayer within that 4-year period even if they were not involved in the claim

HMRC received over 350 formal complaints which explicitly referred to assignments between April 2021 and March 2022, a figure which has been increasing annually. These complaints primarily relate to individuals not understanding that their repayment would be sent to the agent rather than directly to themselves, and where individuals do not recall signing an assignment. This does not include calls to HMRC contact centres from taxpayers questioning why they have not been paid directly.

In addition to the impact on individuals, the effect of assignments on HMRC’s operations is significant. An individual can only legally assign their tax repayment once so that on receipt of an assignment HMRC must record its existence and check that no earlier dated assignment, which would take precedence, exists. There is no set format for assignments but, as legally binding documents, HMRC must be satisfied that assignments are valid and then determine the scope of broadly-worded documents.

Action HMRC is taking

HMRC changed the way it processes assignments for PAYE repayment claims in April 2022. Before this, assignments would be processed to cover the period specified by the repayment agent (almost always the past 4 years), enabling the agent to benefit from any other repayment owed to the taxpayer for that period, even if they were not involved in making the claim. Assignments are now only processed for the tax overpaid for that year, known about at the time we received the assignment. This limits the risk of agents receiving repayments they did not explicitly claim. This interpretation is in line with how taxpayers interpret assignments per the Kantar research.

However, this change does not completely prevent repayment agents from receiving refunds which they did not help claim, as the process of claiming can bring forward a reconciliation which can trigger other money being included in a repayment. Without further restrictions of assignments, this situation cannot be prevented.

Instead of using assignments, repayment agents (and all third parties) can use a ‘nomination’. Some repayment agents already do so. Nominations involve no legal transfer of ownership, and taxpayers can unilaterally remove a nomination. If a taxpayer used a repayment agent to claim, and removed the nomination, the taxpayer would receive the repayment directly but would need to pay the agent the agreed fee.

HMRC provides nomination forms in a standard format which are designed to be processed automatically, allowing quicker processing of repayment claims which ultimately is of benefit to the taxpayer in contrast to the significant level of intervention needed for an assignment.

High volumes of claims where no repayment is due, resulting in delays processing genuine claims

HMRC has seen instances where more than half of claims submitted by repayment agents have not had any repayment due. Processing these claims wastes time and money for HMRC and delays taxpayers with legitimate claims from receiving repayments.

Common reasons that no repayment is due include that no tax has been paid so no repayment is due, that the expense has already been claimed and included in a taxpayer’s tax code, or that key information is missing from the claim form.

If an inflated or ineligible claim is refunded but then is subsequently subject to an enquiry by HMRC, the liability for paying back the overpayment remains with the taxpayer who ends up in a worse-off position financially, as a result of having paid fees to the agent.

Action HMRC is taking

HMRC acts where we find that repayment agents are submitting large numbers of claims where no repayment is due and will temporarily suspend working those agents claims until they demonstrate they have improved the standard of claims submitted. To date HMRC has temporarily suspended 8 agents which has prevented nearly 400,000 ineligible claims being submitted.

High fees

Fees charged by repayment agents can vary significantly, even where the service provided is identical. Some repayment agents charge fees as high as 48% of the value of the repayment for reliefs that a taxpayer could claim directly from HMRC in a matter of minutes, free of charge.

Issues surrounding fees are compounded by the common practice of repayment agents not prominently displaying fee information in their adverts or on their websites. This causes complaints in cases where taxpayers have not understood the basis of the charge and have only become aware of the charge once it is too late. This also prevents taxpayers being able to effectively compare prices between repayment agents. Chapter 7 expands on our approach to ensuring repayment agents prominently display information on fees. The Kantar research found that taxpayers who understood the fee basis at the point of making the claim were accepting of them.

The government is not considering measures relating to the level of fees currently. In addition to the findings on transparency, this is because although fees can be large in percentage terms, many repayments are low value and the net fees are not significant.

Questions

Question 3: For taxpayers: What experiences have you had in interactions with repayment agents?

Question 4: For all respondents: Do you agree with our assessment of the issues?

Question 5: For repayment agents: Do you think our assessment of the issues is fair?

Question 6: For all respondents: Have you seen any other issues with repayment agents?

Question 15

5.  Options for going further

Accepted Answer

As announced in the review of HMRC’s agent-facing powers published in March 2022, HMRC is intending to refresh the Standard for Agents, which will include specific amendments to address issues such as transparency around contingent fees. The government will also be consulting on the wider regulatory framework around provision of tax advice.

However, the government considers that the risks of harm created by the practices of some specialist repayment agents warrant consideration of further measures beyond the actions HMRC is already taking.

Proposed measures on disclosure

The government wants to empower taxpayers and ensure they can make informed decisions about whether to use a repayment agent, and tackle repayment agents who are not clear about their terms and conditions.

Existing consumer rights legislation applies to all businesses. The Consumer Protection from Unfair Trading Regulations 2008 prohibits unfair commercial practices, which includes omitting or hiding material information such as the basis of fees. This is reinforced by the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. Although assignments are not referenced in the legislation, HMRC believes they constitute material information. The Consumer Rights Act 2015 states that terms and notices should be expressed in plain and intelligible language.

The Advertising Standard Authority is the independent advertising regulator for the UK, which ensures adverts adhere to the advertising rules (The Advertising Code) set out by The Committee of Advertising Practice. Section 3 of the code concerns misleading advertising and is explicit that omitting material information is considered misleading.

HMRC has previously worked with the Advertising Standards Authority in tackling the promoters of tax avoidance through a joint enforcement notice.

HMRC will make operational improvements to ensure we refer any repayment agents who we believe are breaching advertising standards or consumer rights rules to the relevant bodies.

Most accountancy professional bodies require their members to have clear terms of engagement with their clients, though many repayment agents do not appear to belong to professional bodies. HMRC’s Standard for Agents does not currently include provisions on terms of engagement. As noted above, HMRC intends to refresh the Standard for Agents to clarify our expectations around how agents should treat customers, and we will consider terms of engagement as part of the process.

Providers of financial services are required to meet stringent fee and disclosure rules set out by the Financial Conduct Authority. HMRC is interested in stakeholder feedback on the proportionality and potential impact of introducing similar measures to the Financial Conduct Authority such as a mandatory pre-contractual disclosure form.

Case study: Financial Conduct Authority’s regulation of Claims Management Companies

The Financial Conduct Authority (FCA) is responsible for the regulation of Claims Management Companies (CMCs), which share a business model with repayment agents. There are various types of CMCs, but the closest parallel is PPI reclaim agents, which operate on a contingent fee basis.

The FCA outlined its view of the key drivers of harm posed by CMCs, which are the same as with repayment agents. These include:

misleading, unclear and unfair advertising
poor disclosure of pre-contractual information about fees and/or the availability of free alternatives to make a claim
unclear fee structures
failing to undertake sufficient checks and collect relevant information before presenting claims to third parties, resulting in submission of spurious claims, slower processing and poor outcomes

The FCA’s approach to ensuring consumers can make informed choices involves setting high-level behavioural standards, as well as prescribing that certain key information be displayed before a contract can be agreed.

Examples of those behavioural standards include that firms must pay due regard to the interests of its customers and treat them fairly, and that they must pay due regard to the information needs of their clients and communicate to them in a way which is clear, fair, and not misleading.

The FCA recently introduced new fees and disclosure rules for CMCs, and also require that CMCs provide a single-page summary information document, which sets out key information in plain language, including but not limited to:

a fee illustration or estimate, and explanation
if the customer can claim themselves for free via a statutory ombudsman or compensation scheme, that they can make a claim themselves for free and that they are not required to use the services of a claims management company

Questions

Question 7: How should HMRC ensure that repayment agents are adhering to existing consumer rights legislation?

Question 8: Is there any more HMRC should do to help consumers make informed choices about whether to use a repayment agent?

Question 9: Should HMRC consider introducing measures which would require repayment agents to display material information before a contract is considered valid, such as a pre-contractual disclosure form?

Proposed measures to restrict the use of assignments

The government believes that the current approach to accepting assignments is problematic. Whilst HMRC operational changes in processing assignments set out above have limited the ability of repayment agents to profit from claims they are not involved in, the changes have not, nor were they intended to, address the wider detriment to taxpayers of assignments. Specifically, there remains:

the ability of repayment agents to profit from work they have not been involved in
a lack of understanding by many taxpayers about the nature of what they are signing
the inability for taxpayers to unilaterally withdraw from assignments
the significant impact on HMRC of processing assignments which directly translates into poorer customer service

As such HMRC is likely to continue to receive a growing number of complaints. Customers consider that as the problem with assignments relate directly to tax refunds, it is for HMRC to take action to address the detriment suffered. We are therefore seeking views on the following options, which would have a UK-wide application, to restrict the assignment of tax repayments:

to prohibit the assignment of tax repayments. There is precedent for such a measure in the Social Security Administration Act 1992 S.187 which voids the assignment of certain benefits. We are mindful that there are areas of the tax system in which assignments are used without causing any consumer protection issues, and we would seek to appropriately target any restriction
to prescribe the format of an assignment of a tax repayment and include a clearly worded customer protection message. This would go some way to address both the processing impact of currently variously structured assignments, while providing taxpayers with greater understanding and protection
requiring that HMRC must formally agree to the assignment of tax for it to be valid. This would enable HMRC both to influence the format of a particular assignment and to satisfy itself that the taxpayer understands what they are signing. While this approach would be beneficial in limited circumstances it is unlikely to be practical on a large scale. Given the volume of assignments received, this would be challenging to implement and may not address the root cause of the issue

Questions

Question 10: Should HMRC legislate to restrict the use of assignments?

Question 11: Should restriction comprise prohibition of the use of assignments of tax repayments or some form of limited restriction?

Question 12: If limited restriction, do you favour either option b or c outlined, or do you think another form of limited restriction would be better?

Question 13: If you are an agent and use assignments, which areas of tax do you do this in, and why?

Question 14: If you are an agent, are there any improvements to the nominations process that would make them more appealing?

Question 15: What impact would a prohibition of assignments have on your business?

Question 16: What impact would a limited restriction of assignments have on your business?

Question 17: Do you think prohibiting assignments would address the consumer protection issues cited above?

Question 18: Do you think restricting assignments would address the consumer protection issues cited above?

Proposed measures to require repayment agents to formally register with HMRC and strengthen evidence of authorisation by customers

The government wants to ensure that repayment agents are compliant with their legal obligations and are not submitting large volumes of claims where no repayment is due.

All tax advisers who provide services by way of business, including repayment agents, have a legal obligation to be supervised under the Money Laundering Regulations 2017 (MLRs). The absence of a requirement for repayment agents to register with HMRC makes it difficult for HMRC to ensure compliance with the MLRs. Trading without supervision is an offence under the MLRs which can result in imprisonment or an unlimited fine.

While HMRC contacts new repayment agents when they start sending in claims to check their processes are compliant, repayment agents do not need to be formally registered with HMRC as an agent to submit claims and receive repayments where they operate solely through sending in paper forms.

The lack of a digital registration requirement also makes it difficult for HMRC to systematically monitor and address instances where repayment agents submit tens of thousands of claims where no repayment is due.

HMRC is considering a requirement for all repayment agents to formally register with HMRC before we accept any claims they submit. This would involve agents providing details to HMRC about their business such as the names of any directors, trading address, company registration number, and details of their Anti-Money Laundering Supervision registration. HMRC would check the validity of these credentials.

If we proceed with this, we are seeking views on the preferred registration route. We think this should involve agents signing up to the Agent Services Account to generate a unique reference number. This is our most modern and robust entry route, which will enable HMRC to check an agent’s credentials and enforce the Standard for Agents more consistently. More than 40,000 agents have already signed up for the Agent Services Account.

We are also seeking views on whether we should require repayment agents to be formally authorised by their clients with HMRC before they can submit a claim. This could involve an agent using either form 64-8 or HMRC’s online authorisation service. This would impose an administrative burden on both agents and clients but would establish a link on our systems, facilitating monitoring of both claims where no repayment is due and fraudulent attacks on the system.

Questions

Question 19: Should we require repayment agents to register with HMRC via the Agent Services Account before processing any claims they submit?

Question 20: Should we require repayment agents be authorised by their clients with HMRC before they can submit claims on their behalf?

Question 21: If you are a repayment agent, what impact would a requirement for formal authorisation by your clients have on your business?

Question 22: Should this requirement apply only where repayments are paid directly to the agent (including via nomination), or in all cases?

Closing questions

Question 23: Do you have any other views on the issues or potential measures regarding repayment agents?

Question 24: Have you seen evidence of a consumer protection issues with repayment agents concerning heads of duty other than Income Tax?

Question 25: Do you think measures proposed in this consultation could, or should, apply to other areas in which repayment agents act?

Question 26: Are there other legal vehicles not mentioned that could give rise to unfair contract terms for taxpayers?

Question 16

6.  Assessment of impacts

Accepted Answer

Summary of impacts

Year	2021 to 2022	2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027
Exchequer impact (£m)	NIL	NIL	NIL	NIL	NIL	NIL

Exchequer Impact Assessment

Impacts	Comment
Economic impact	This measure is unlikely to have any significant economic impacts.
Impact on individuals, households and families	This proposal is expected to have a positive impact on the approximately 500,000 individuals who use repayment agents annually. The impact on individuals will be fully examined and detailed as part of this consultation.
Equalities impacts	These measures are expected to have a positive impact for consumers across the groups sharing protected characteristics. Equality impacts will be further considered following this consultation.
Impact on businesses and Civil Society Organisations	These measures are expected to impact approximately 200 repayment agents. The impact on repayment agents will be fully examined and detailed as part of this consultation.
Impact on HMRC or other public sector delivery organisations	There are no costs to HMRC at this stage. Restricting assignments is expected to deliver processing efficiencies.
Other impacts	No other impacts have been identified at this stage.

Question 17

7.  Summary of consultation questions

Accepted Answer