HMRC not HVAs should prompt routine rebate claimsby
With high volume agents (HVAs) popping up and cashing in on the public’s ignorance, Paul Aplin says it’s time HMRC helped taxpayers to make the routine claims they are eligible for.
Recently, while reading the online edition of a well-known newspaper, I was confronted with one of those incredibly annoying pop-up adverts. It said that if I was married, I might be owed a tax refund. Having never looked at a website for a tax refund company before, temptation got the better of me.
The website had an eligibility checker. It told me that I couldn’t qualify for marriage allowance if I had already claimed it and moreover that neither I nor my spouse could claim marriage allowance if we were self-employed. Wondering how many people would have taken these answers at face value and given up, I decided to look at a few more sites devoted to marriage allowance and employment-related expenses. Fees varied from 35% of the refund obtained plus a £50 administration fee (plus VAT) to 42% plus a £100 administration fee, plus VAT.
At this point I remembered the research paper HMRC commissioned last year The use of high volume agents to claim tax rebates, which sought “to better understand the motivations and experiences of customers of high volume agents”. The research found a wider range of fees than I had (from 10% to 50% of the refund obtained) and highlighted some other issues.
Just sign here
One was the use of deeds of assignment by some high volume agents (HVAs). The research found that “participants generally did not understand that the HVA could receive commission for additional claims made by the customer directly to HMRC or through another HVA during the time period specified on the agreement.” In short, the HVA could take commission on future claims even if made by the taxpayer, another agent or adjusted through a PAYE coding. This is an issue that the Low Income Tax Reform Group (LITRG) has rightly expressed concerns over, and has now published comprehensive guidance on.
This issue is of particular concern for those facing language or literacy barriers and for those who worry about dealing with government departments. If deeds of assignment are used at all – and I share LITRG’s concerns here – there should be a prominent warning in plain language leaving no doubt in the individual’s mind about exactly what they are agreeing to.
If you know, you know
Awareness is a problem. Many people don’t realise that they might be entitled to claim until an HVA advert pops up. And if that is how they make the discovery, they probably don’t realise that they can claim direct (and free of charge). The survey confirms this: “It was rare that participants had considered applying directly to HMRC – either because they were not aware that they could, or because they thought they were already applying through an official channel.”
Several participants, having discovered during the survey interview that they could claim directly and free of charge through HMRC, said they would prefer to do this for any future claims to avoid paying commission, but that if doing so proved complicated, they would still prefer to use an HVA.
Others learned about their entitlement from friends and family, work colleagues, suppliers of equipment and uniforms, trade unions and employers.
Having become aware of the potential for a claim, the next problem is the perceived or actual complexity of the process of claiming.
For those confident enough to do it themselves, the sections to claim marriage allowance and tax relief for job expenses on gov.uk are actually pretty good, guiding potential claimants through a series of questions in relatively straightforward language. But some would doubtless still prefer to pay someone else to do the navigating.
What’s the answer?
HMRC has made no secret of its concerns about some HVAs and has taken action in the past to deal with what it described as unacceptably high levels of ineligible claims. It has recently made using Form P87 mandatory for employment expenses claims and will reject claims made on substitute forms (used by some HVAs). The new P87, which enables multi-year claims and claims for multiple employments, will be processed automatically using Optical Character Recognition and Robotic Process Automation. Any P87 with attachments (including deeds of assignment) will, however, be processed manually, delaying the repayment process and disrupting the HVA business model. I suspect we will see further measures aimed at addressing HMRC’s concerns.
The core issues I want to address however are awareness and process. The survey suggested that HMRC needed to raise awareness of the process and that it should be made clearer and easier to navigate. I agree.
Proactive and personal
I’d like to see HMRC being as proactive as possible on the awareness front, signposting reliefs through general and targeted advertising, through employers and trades unions, and through the sources that the research found potential claimants are most likely to engage with. I’d also like to see technology used to the full to help people navigate the claim process (the survey, incidentally, found that participants’ levels of confidence using digital services were generally high).
Smart use of technology, delivering entitlements simply and at no cost to the claimant, could change people’s perception of the tax system and of “dealing direct”. If a claim can be made easily online through the Personal Tax Account (or going forward, the Single Customer Account) or the HMRC app on smart phones, more people will be empowered to self-serve.
I’d encourage HMRC to go even further and use technology to proactively prompt individuals to claim, if the information held suggests they could be eligible.
There will always be people who want – and are happy – to pay for help (and there will always be plenty for accountants and tax advisers to advise them), but my vision for the future is one where the journey to make basic, routine claims starts not with a commercial pop-up and ends with a substantial fee, but one that starts with a proactive prompt from HMRC and where the process continues via HMRC at no cost at all.
I think it is entirely achievable. It could even make pop-ups toast.
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Paul Aplin was for many years a tax partner with an independent West Country firm. He is a past president of ICAEW, a former Chair of the ICAEW Tax Faculty, a member of CIOT Council and the Tax Technology Committee of CFE. He is a non-executive director of three companies, a member of HMRC’s Admin Burdens Advisory Board and the OTS Board....