Awareness key to solving repayment agent issuesby
Requiring repayment agents to formally register with HMRC might solve some of the current issues around claims. But guiding taxpayers through a simple online process could reduce the number of people seeking help from these agents in the first place.
A few weeks ago, I suggested that HMRC should be more proactive in helping taxpayers to make routine claims. I had in mind the kind of claims that high volume agents (HVAs) make, such as for marriage allowance and employment-related expenses.
I mentioned the use of deeds of assignment by HVAs, the high levels of commission they often take on claims and referred to some research that HMRC had commissioned. On 22 June, HMRC published a new consultation on the topic: protecting customers claiming tax repayments.
While recognising that repayment agents can provide a useful service to taxpayers, the new consultation highlights several issues: the use of deeds of assignment; taxpayers not being fully aware of the terms and conditions to which they are agreeing (or indeed that they are dealing with a third party and not HMRC); and the large number of ineligible claims made by some repayment agents.
Some of these issues are matters of consumer protection, such as ensuring that people understand exactly what is being provided, by whom and at what cost. I was prompted to write my last article after looking at a repayment agent website with an eligibility checker that gave factually incorrect answers. My suspicion was not that the checker was wrong due to the incompetence of its designers but that it was deliberately designed to put off potential claimants who might not fit the repayment agent’s business model.
That business model is sometimes best described as speculative, with claims submitted based on an incomplete picture of the taxpayer’s position, leaving it to HMRC to check the detail. HMRC is understandably concerned and cites instances where more than half of claims submitted by repayment agents have not had any repayment due. It has to date temporarily suspended eight agents, preventing the submission of nearly 400,000 ineligible claims.
While assignments cannot include future tax years, they have often been used to enable repayment agents to receive refunds they did not actually facilitate and to profit from work they were not involved in. In the year to March 2022 HMRC received over 350 formal complaints that explicitly referred to assignments. Although HMRC now only processes assignments relating to tax for the relevant year, that does not completely resolve the issue. Unlike a nomination, a taxpayer cannot unilaterally withdraw from an assignment.
HMRC sets out three options in the consultation: prohibiting assignment of tax repayments; prescribing a format for assignments relating to tax repayments to include a clearly worded consumer protection message; requiring formal agreement to the assignment for it to be valid. HMRC says that the third option would be challenging to implement and may not address the root cause of the problem.
The Low Incomes Tax Reform Group (LITRG) welcomed the publication of the consultation but urged HMRC to take further action now, including greater scrutiny of deeds of assignment to ensure that they are valid.
HMRC has previously worked with the Advertising Standards Authority and says that it will refer any repayment agents it believes are breaching advertising standards or consumer rights rules to the relevant bodies. It is also proposing to include engagement terms (and specifically transparency around fees) when refreshing the standard for agents.
There is however a more fundamental issue: repayment agents do not have to be formally registered with HMRC as agents in order to submit claims and receive repayments when they operate solely using paper forms. That also makes it difficult for HMRC to monitor and address instances of high volumes of claims where no repayment is due. HMRC is therefore considering a requirement for all repayment agents to formally register with HMRC (and as part of that process to provide details of directors, trading address, company registration number and anti-money laundering supervisor).
One option proposed in the consultation is to require repayment agents to sign up for an agent services account. Another is to require formal authorisation by clients via a 64-8 or through the online authorisation service.
The impact assessment attached to the consultation says that around 500,000 individuals use repayment agents annually. If online reviews are to be believed, many are happy with the service they receive. But others are put off claiming through incorrect information, or charged fees they did not expect or understand through a mixture of poor information and use of assignments. Many claims are speculative and these waste HMRC’s time and resources, resulting in delays for genuine claimants and their professional advisers.
Clearer information, restrictions on the use of assignments and registration of repayment agents would all help improve this area of the market. But I still believe that HMRC should be more proactive in raising awareness of the potential for claims and then guiding taxpayers through a simple, free, online process to secure their refund.
And I would echo what AWEB members said in response to that last article: many people are still not aware that they can sign up for a personal digital tax account or what it can do for them. Greater awareness could reduce the number of people seeking help from repayment agents in the first place.
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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....