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HMRC to reimburse 60,000 Tax Credits Ltd clients

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Following an investigation by HMRC, the tax authority will repay 60,000 clients of Tax Credits Ltd due to the company’s unsatisfactory processes.
 

30th Sep 2022
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Taxpayers who have claimed refunds through the high volume refund agent (HVRA) Tax Credits Ltd since December 2021 will be receiving a repayment from HMRC after an investigation into the company’s processes.

Releasing a statement this week, the tax authority noted that they were “not satisfied that the new process and documentation led to a valid assignment of repayments to Tax Credits Ltd” and so are reimbursing a total of 60,000 taxpayers who have used the scheme. 

Tax Credits Ltd, which had introduced a new online process in December 2021, was also accused of providing little evidence that the clients were fully aware of their intention to assign ownership of their refund, with HMRC citing “clients not being shown the documentation or being specifically asked to sign the page” as being chief concerns.

Lack of transparency

In the lead-up to the announcement, there had already been a litany of complaints involving Tax Credits Ltd over their use of customer data and lack of transparency. Citing multiple examples in an article from MoneySavingExpert, it was reported that multiple customers of the agent unknowingly signed over authority of their tax refunds to the third party.

Catherine Wren, 44, told MoneySavingExpert that a Facebook advert with similar branding to HMRC was what first grabbed her attention: “I filled out an initial enquiry form to see if I would be due anything and didn’t think anything else of it until I got a letter from HMRC. At no point did I sign any contract. I called HMRC and was told I’d given this company authority to claim my rebate.”

Others reported that they too had been fooled by similar tactics used by Tax Credits Ltd, with customers losing 48% of their tax refund to the HVRA.

Clamping down

HMRC has already made moves to better scrutinise tax refund companies such as Tax Credits Ltd with their recent restructuring of the form P87 process earlier this year. 

The P87 form, which was designed to ensure that claims for income tax relief on employment expenses are made directly to the tax authority, has meant that HVRAs will no longer be able to use their own customised claim forms, which often incorporate a deed or letter of assignment.

The P87, as well as HMRC’s recent moves to reimburse out-of-pocket customers is yet another push by the tax authority to clamp down on tax repayment companies who have benefited from taxpayer confusion.

And with complaints revolving around deeds and assignments increasing year on year, it’s not surprising that HMRC has begun painting a target on these companies’ backs. 

A positive move

Since the announcement, some in the AccountingWEB community have made their thoughts known on the news, with users taking a surprisingly positive tone over the usually much-maligned tax authority’s decision to reimburse clients.

“Nice one HMRC! This is exactly what they are supposed to be doing. It’s a shame it seems to be a newsworthy event and not just ‘normal business’,” wrote member Ireallyshouldknowthisbut, while Hugo Fair was equally happy that HMRC was “finally gunning for leeches of this ilk”.

Others however, were less enthused with the news, arguing that the reimbursement will now be at the cost of the taxpayer.

Paul Crowley felt that a simple bail-out wouldn’t address the systemic issues, saying: “This really is the taxpayer giving claimants money that they lost by using a bad tax agent. No incentive now to use a decent honest tax agent if the state bails me out when I pick the wrong one.”

Regular contributer rmillaree was equally unimpressed by the news, arguing that HMRC should have acted quicker in its response to Tax Credits Ltd’s schemes. “HMRC are beyond stupid if they are presuming any of these agencies that have only been around for zero amount of time are likely to be doing the right thing if they are processing that volume of transactions – wait 18 months and the damage is done,” they wrote.

More to be done

Industry voices were similarly cautiously optimistic about HMRC’s announcement, however many were clear that more needed to be done to tackle the issue. Responding to the announcement, the Low Income Tax Reform Group (LITRG) argued that HMRC needed to do more to simplify refund processes for confused tax claimants.

“There is currently a tortuous and difficult online journey, which is likely to prevent or discourage people from self-serving,” LITRG said.

“HMRC should bring the online tax refund company application process out from behind the government gateway, which has a very high level of security/multi-factor authentication and so on.”

The Association of Taxation Technicians (ATT)’s report also suggested a review of HMRC’s current tax refund process, arguing that HVRAs “have capitalised on digitalisation to fill a gap left in the process of modernising the tax system.”

Both the ATT and LITRG argued for better visibility of the tax authority’s own tax refund processes, pushing for a more modern approach to reaching its audience.

“Our key recommendations in these areas are that HMRC uses the internet, especially social media, to raise awareness more. Life is increasingly lived online, especially among the younger generations. This will increase visibility of HMRC but also help promote HMRC as accessible, modern and technologically advanced,” said LITRG’s report.

Head of LITRG, Victoria Todd, also commented on the HMRC’s track record, leaving the tax authority with a reminder of its duties. “We urge HMRC to keep this issue as a priority and review all repayment agents’ practices, not just in relation to assignments, but other areas of consumer protection. Where agents fall short, HMRC should use all existing powers open to them to take immediate action to protect taxpayers,” she said.

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Replies (14)

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By Paul Crowley
04th Oct 2022 19:28

'Head of LITRG, Victoria Todd, also commented on the HMRC’s track record, leaving the tax authority with a reminder of its duties. “We urge HMRC to keep this issue as a priority and review all repayment agents’ practices, not just in relation to assignments.'
So now this person wants HMRC to target EVERY tax repayment to an agent?

Would she prefer that repayment clients need to pay fees in real money before the tax claim is submitted?

It could be simple.
If there has been no complaint in respect of a tax agent that has acted for 10 years....Leave him alone. Risk is minimal
If the tax agent is regulated by a professional body.........Leave him alone. He is regulated
For all others?
HMRC make a risk assessment. Cannot be too difficult, HMRC know every client they have acted for and the size of refund.

Thanks (4)
Replying to Paul Crowley:
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By Hugo Fair
05th Oct 2022 10:49

Perfectly valid conclusion ... although LITRG are usually on the ball, so may have been slightly misrepresented this time?

What seems to be missing in the article is comment on HMRC's view regarding payment of a claim being directed straight to the agent.
I don't know whether you ever use that facility?
I can see why it's useful in certain circumstances, but also why it's beloved by the scammers.

Or indeed any comment on the other aspect that makes the scammers salivate ... the option to assign *any/all* repayments within a period of years to the agent (and without any further intervention/signature by the taxpayer).

Basically the process seems flawed (in the sense of multiple points of weakness) ... and, as you say, HMRC are failing to apply basic risk management.

Thanks (2)
Replying to Hugo Fair:
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By johnjenkins
05th Oct 2022 10:57

HMRC check agents who regularly receive more than 20% of turnover for CIS clients. They do it by asking to check unnamed clients without opening an enquiry or having regard to GDPR.

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Replying to johnjenkins:
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By Paul Crowley
05th Oct 2022 12:25

Not aware of this

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Replying to Paul Crowley:
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By johnjenkins
05th Oct 2022 14:07

The standard is an opening 2 page letter explaining the whys and wherefores. It's called an HMRC initiative and apparently it has stopped lots of agents claiming estimated expenses.

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Replying to johnjenkins:
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By Paul Crowley
05th Oct 2022 15:54

Much appreciated
The issue on estimated expenses is that estimates can be way over. Some claims I see on a takeover are......surprising.

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Replying to johnjenkins:
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By Paul Crowley
06th Oct 2022 01:19

That is specifically looking at fraud against HMRC, as in improbable tax result. But the usual short answer of capital allowances is already contained within the return.

A recent related matter was a cis subcontractor that is a sole trader who had both an employee and a subcontractor. He had 2 identical enquiries within 4 years which I presumed was simply because the refund was so big.
Sole trader meant no offset of PAYE and subcontract down against subcontract up.
In each case is was just prove the deductions suffered, and in one case it was because the HMRC Spreadsheet was wrong. The total at the top of spreadsheet did not go all the way to the bottom. Ten seconds of logic checking by HMRC and they would have seen their error. The spreadsheet came as paper so took a while to re-enter.
But that paper listing only arrived after the work was done. Not HMRC at their finest

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Replying to johnjenkins:
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By johnjenkins
06th Oct 2022 09:54

Oops I meant 20% of tax deductions.

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Replying to Hugo Fair:
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By Paul Crowley
05th Oct 2022 12:15

Old fashioned firms like mine regularly get the refund paid into an our named client account, deduct our fee and repay the client
This is reducing, at least for us because the clients are usually labour only subcontractors.
That type of client is usually financially disorganised
Lots of firms do it. For us about 25 out of 300 tax returns
They would be challenged if we insisted on payment before filing
ICAEW has lots of rules on this.
It is absolutely normal

I agree that the attributed comments are a bit vague, but the idea that proper long term regulated tax agents operating within the rules need all of their 'practices' to be reviewed by HMRC is an outrageous soundbyte worthy of only the gutter press.

'Basically the process seems flawed (in the sense of multiple points of weakness) ... and, as you say, HMRC are failing to apply basic risk management.'
The issue of assigning future refunds is outrageous. That would never be done by a proper tax agent.
The refund is claimed on the tax return for the year of claim. Hence limited to one tax year.
If HMRC are accepting assignments then the fault is with HMRC being compliant with the scammers, not tax agents
Simple answer is for HMRC not to accept assignments.

But if they do that then who is going to be willing to do the work for all those tiny little claims?

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By Paul Crowley
05th Oct 2022 12:45

60,000 at say £120, £7.2 M?
Maybe time for HMRC to spent £40K having a person look at bulk repayment agents, reporting to someone that cares, so that would be Jim and Gyles out of the picture.
Cannot be that difficult to find them if tax payers can find them. The search is going to be dead easy and just needs an iphone
How many bulk agents are there?

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By maasrw
05th Oct 2022 14:48

As a taxpayer I am happy for HMRC to bear the loss on money that they have given away to fraudsters. However, they surely have a duty to act fairly. I wrote an article in Taxation magazine a few weeks ago, criticising their decision to pursue taxpayers for money that HMRC had given away to another group of fraudsters. I do not think it fair for HMRC to decide that sometimes when they are scammed they will bear the loss but at other times they will pursue the taxpayer whose name was used by the fraudsters.

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Replying to maasrw:
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By Paul Crowley
05th Oct 2022 15:56

What date of magazine?
I still get it as paper and delivery has been erratic of late

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Replying to Paul Crowley:
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By maasrw
05th Oct 2022 16:01

15th August!

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Replying to maasrw:
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By Paul Crowley
05th Oct 2022 17:31

Much appreciated

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