HM Revenue and Customs (HMRC) is changing the way taxpayers who use a repayment agent can receive overpaid tax to protect them and raise standards among repayment agents.

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

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 will make it easier for taxpayers to stay in control of their repayments.

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.

The changes follow HMRC’s consultation last summer on ‘Raising standards in tax advice: Protecting customers claiming tax repayments’. Responses to the consultation highlighted the need to improve agent transparency and standards with the overall aim of better protection for taxpayers.

As a result, HMRC is today also setting out the following measures:

• updated standards for agents – applicable to all tax agents and include greater transparency requirements
• a new HMRC registration process for repayment agents – to make the agent sector more transparent so customers better understand what they are signing up to

Victoria Atkins, Financial Secretary to the Treasury, said:

For too long taxpayers have been left in the dark as a result of misleading and opaque agreements with repayments 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.

This Government is making it easier to navigate the system for all taxpayers using an agent to claim money that’s owed to them.

Victoria Todd, Head of the Low Incomes Tax Reform Group, said:

We welcome these additional steps, which show HMRC recognises the important role they play in consumer protection. Refund companies have a legitimate role in the tax system, but the practices of some of these companies in recent years have been unacceptable. The proposed changes will hopefully address problems around the use of assignments, increase transparency for taxpayers and set clearer standards for these companies’ behaviour.

Alongside this, it is important that more effort goes into raising awareness of refunds and ensuring it is as simple as possible for taxpayers to access them. We look forward to working with HMRC on the detail of the proposals.

These changes form part of the government’s commitment to tackle problems in the repayment agent market, which is currently an unregulated sector.

Responses to HMRC’s recent consultation overwhelmingly supported the need for improving standards in the repayment agent sector. The updated HMRC standard for agents includes:

• greater evidence of customer consent. This aims to ensure that taxpayers better understand the agreement they’re entering into
• stricter transparency rules, including introducing a 14-day ‘cooling off’ period for customers after entering into an arrangement with an agent, and an obligation on agents to ensure all communications and advertising material are fair, clear, accurate and do not mislead or conceal material facts

Further details on the approach to registration for repayment agents will be set out in due course.

If taxpayers think they are owed a tax rebate, they can claim directly from HMRC via the free and secure service on GOV.UK and will receive 100% of the money owed.

Further information

HMRC’s response to the ‘Raising standards in tax advice: Protecting customers claiming tax repayments’ consultation.

HMRC received 167 responses between 22 June and 14 September 2022.

HMRC has published their approach to working with agents.

An assignment is a legally binding agreement between a taxpayer and a repayment agent. When an assignment is in place it means that HMRC is obliged to issue a repayment of income tax to a taxpayer’s agent rather than directly to the person who has overpaid. The agent then takes their fee from this money, before repaying the balance to their client. HMRC will now change this, by rendering void assignments – meaning they won’t be legally recognised for income tax purposes. As a result of this change, people who want their agent to be sent money directly by HMRC will need to use a non-legally-binding ‘nomination’ – which can then be cancelled at any point.

Assignments made before the legislation comes into force remain legally binding. Anyone who attempts to make an assignment for the repayment of income tax after the legislation comes into effect will find that it is invalid.