Why taxpayers deserve stronger protection from agents who hide behind opaque agreements

Businesses specialising in helping people and firms make claims for tax refunds often advertise on social media and frequently operate on a commission-based fee structure.

HMRC has acknowledged that many repayment agents support customers to access tax relief or repayments they may otherwise have never heard of. But it has also frequently seen cases where repayment agents have pushed the boundaries of eligibility, exploited customers, or made fraudulent claims.

HMRC received more than 2,200 complaints about repayment agents between January 2022 and October 2022. Some of these complaints related to the use of assignments, which legally transfer the benefit of the taxpayer’s repayments to the agent. Evidence has been uncovered of taxpayers not being made aware of or fully understanding the terms and conditions. In some cases, people are unaware they are dealing with a third party and not HMRC.

HMRC said it will introduce legislation to change the way repayment agents are paid for their services and provide enhanced protection for customers from the unscrupulous tactics used by some operators.

This includes 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 aims to make it easier for taxpayers to stay in control of their repayments. HMRC said there will also be a new registration process for repayment agents, to make the agent sector more transparent so customers better understand what they are signing up to. Currently, repayment agents are not required to register with HMRC, so the department’s ability to check they are registered for anti-money laundering supervision and that they meet HMRC’s standards for agents is limited.

Sam Richardson, deputy Which? Money editor, said some taxpayers have lost hundreds of pounds after being lured in by third-party companies to claim tax rebates only to be hit with “hard-to-justify fees”.

Leeds-based Angela MacDonald, HMRC’s deputy chief executive and second permanent secretary, said: “ HMRC’s updated standards for agents will level the playing field and provide the benchmark we expect all repayment agents to meet.”

HMRC and the Treasury are to be applauded for deciding to act against repayment agents who hide behind misleading and opaque agreements. It’s to be hoped this robust approach will drive unethical operators out of the market forever.

Greg Wright is the deputy business editor of The Yorkshire Post