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Tax agency stopped from operating by HMRC

A company, who breached anti-money laundering rules, can no longer trade as a repayment agent.

A company which charged taxpayers significant sums to make claims for tax refunds has been stopped from operating.

Tax Credits Ltd (TCL) can no longer trade as a repayment agent after HM Revenue and Customs (HMRC) found they had committed serious anti-money laundering breaches.

As a result of breaching the regulations, which are predominately designed to prevent businesses being exploited by criminals to launder money, it is now a criminal offence for TCL to trade as a tax repayment agent.

The move comes weeks after HMRC outlined greater protections for customers using repayment agents.

Taxpayers can use repayment agents to make claims for repayment of tax, and while many customers are happy with the service they receive, a large number of taxpayers have complained about the lack of transparency in agents’ processes for signing up clients and high charges for using their services.

Angela MacDonald, HMRC’s Deputy Chief Executive and Second Permanent Secretary, said:

TCL have ignored their responsibilities under the anti-money laundering measures designed to protect us all from financial crime.

We will not allow a small number of bad actors to tarnish the reputation of the whole tax agent sector.

It is crucial taxpayers understand the entitlements they can claim directly from HMRC and are properly protected from the misleading tactics used by some repayment agents. The greater protections we’re bringing in will help to stop people unwittingly losing their hard-earned money to misleading agents.

Around 11,000 TCL clients, whose claims had been paused during investigations into TCL, will now receive their tax refund directly from HMRC.

HMRC will contact all affected clients by the end of March to explain their refund. The refunds will be made automatically – customers do not need to contact HMRC to receive their payment.

In response to public concern, HMRC recently consulted on how to protect taxpayers using repayment agents and unveiled a package of measures last month, which included stopping the use of legally-binding ‘assignments’ as part of claiming an Income Tax repayment, improving agent standards and a requirement for repayment agents to register with HMRC.

HMRC urges anyone thinking of using a tax repayment agent to carefully consider their options when appointing a tax adviser to act on their behalf. Taxpayers are urged to do their research before committing to anything, and are reminded that they, not the tax agent, are ultimately responsible for their own tax affairs.

Taxpayers are advised to be particularly careful when clicking on online ads as some unscrupulous repayment agents have made their customer sign-up pages appear to be mere requests for more information.

Anyone who thinks they are owed a tax rebate can make claims direct with HMRC via GOV.UK; they can do this for free and will receive 100% of any refund.

If a taxpayer can show a tax repayment agent has made an invalid claim with HMRC on their behalf, they can contact HMRC.

Further information

Money Laundering Regulations apply to a number of different business sectors, including accountants, financial service businesses, estate agents and solicitors. Every business covered by the regulations must be registered with a supervisory authority, such as HMRC.

A business must not trade without being registered with HMRC or another money laundering supervisor under the ML regulations. Trading while not registered is a criminal offence and may result in a penalty or prosecution.

Anti-money laundering regulations require tax repayment agents to carry out risk assessments, have the correct policies, controls and procedures in place, carry out appropriate staff training and provide registration information.

HMRC published the consultation Raising standards in tax advice: Protecting customers claiming tax repayments in June 2022 to consider ways to better protect taxpayers. The consultation closed on 14 September 2022. HMRCpublished the responses to the consultation on 11 January 2023, which also highlights next steps.

The government intends to legislate to render void assignments of income tax repayments. The use of legally binding assignments, which transfer any repayment of income tax to a taxpayer’s agent rather than directly to the person who has overpaid, will be stopped as these can only be cancelled when the agent and taxpayer agree. This has meant customers unhappy with their agent could not decide to end the agreement on their own.

Going forward, a taxpayer may still choose to use a repayment agent to reclaim overpaid income tax by making a nomination instead, which they can cancel at any time. Using this process will make it easier for taxpayers to stay in control of their repayments.

In January 2023, HMRC published the updated standard for agents which sets out guidance on the minimum standards expected of all agents.

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