Consultation outcome

Raising standards in tax advice: protecting customers claiming tax repayments (summary of responses)

Updated 11 January 2023

Ministerial foreword

The government wants to make tax fairer, simpler and to help our economy thrive. We are committed to ensuring that, where customers are entitled to claim a tax repayment or a relief, they can do so freely and easily. The number of taxpayers using ‘repayment agents’ to claim repayments of tax on expenses and other income tax reliefs on their behalf has increased significantly in recent years. While these agents can provide a valuable service to taxpayers, there has been growing concern around consumer protection issues in the repayment agent market.

HMRC have received a significant number of complaints from customers who have used repayment agents with income tax-related claims. Feedback suggests that some repayment agents are not transparent about their terms and conditions, resulting in customers not fully understanding or being made aware of what they are signing away, or even that they were dealing with a third party and not HMRC.

The government is committed to maintaining trust in the tax system and protecting customers. In June 2022, the government published a consultation titled ‘Raising standards in tax advice: protecting customers claiming tax repayments.’

The consultation considered measures to ensure individual taxpayers get the information they need to make informed decisions about whether to use a repayment agent, to restrict the use of assignments (which legally transfer the benefit for the repayment from the customer to the agent), to require repayment agents to formally register with HMRC and strengthen evidence of authorisation by customers.

The government received a large number of responses to this consultation which overwhelmingly agreed with the problems it described. As a result of the feedback received, the government will take a number of steps to improve transparency in the repayment agent market and protect customers, including:

• legislation to render void assignments of income tax repayments

• requiring repayment agents to register with HMRC

• introducing new transparency requirements for agents in the HMRC Standard for Agents, explore introducing mandatory pre-contractual disclosure forms and strengthening checks on repayment agents

• undertaking further work to strengthen the evidence that a claim has been made with a customer’s consent before processing it and improve the way in which customers authorise their agent

These actions will tackle some of the issues associated with repayment agents and will also support the government’s broader agenda to raise standards in the tax advice market.

Victoria Atkins MP
Financial Secretary to the Treasury

1. Background to the consultation

HMRC has seen an increase in the number of businesses that specialise in helping taxpayers and businesses to make claims to HMRC that result in a tax repayment as their primary service. HMRC refers to these businesses as ‘repayment agents’. They are often virtual, advertising on social media and tend to operate on a no-win no-fee, commission-based fee structure.

Repayment agents operate across most taxes and reliefs where a repayment can be generated. While many repayment agents support customers to access reliefs or repayments they may not otherwise have been aware of, HMRC has frequently seen cases where repayment agents have pushed the boundaries of eligibility, exploited customers or made fraudulent claims.

In 2021 and 2022 government took action, including proposed legislation, to address risks related to Research and Development tax relief claims.

Around 500,000 individuals used repayment agents to claim income tax repayments in tax year 2020 to 2021. Many taxpayers value this service, from being made aware they can claim in the first place, through to providing straightforward customer journeys.

However, HMRC has received increasing numbers of complaints from customers who have used repayment agents in income tax related claims as well as from a range of stakeholders including charities (HMRC received over 2,200 complaints about repayment agents between January 2022 and October 2022). These include:

• the use of assignments, which legally transfer the benefit of the taxpayer’s repayments to the agent

• taxpayers not being made aware of or fully understanding the terms and conditions to which they are agreeing

• taxpayers being unaware that they are dealing with a third party and not HMRC

HMRC has also seen large numbers of ineligible claims being submitted by some repayment agents, which delays the processing of genuine claims. Large volumes of claims sent in bulk can have a significant effect on HMRC’s ability to meet its expected service levels – with thousands of claims arriving at once causing backlogs and delays.

The consultation forms part of government’s broader ambition to raise standards in the tax advice market and asked questions on:

• what more could HMRC do to make taxpayers aware they are eligible for a refund and how they could improve the process of claiming directly

• what experiences taxpayers have had with repayment agents and if the assessment of the issues is fair

• what should HMRC do to ensure repayment agents are adhering to existing consumer rights legislation and how they can help consumers make more informed choices about using repayment agents

• whether HMRC should introduce a requirement for a pre-contractual disclosure form

• if HMRC should legislate to restrict the use of assignments and what the impacts of restricting the use may be on businesses

• if repayment agents should be required to register with HMRC via the Agent Services Account and what the impacts could be

• whether individuals should have to authorise the repayment agent as their tax agent before HMRC will process their claim

2. Summary of responses

The government is grateful for the detailed consideration and comments provided in response to the consultation.

The consultation ran from 22 June 2022 to 14 September 2022 and during this time HMRC:

• held 8 roundtables

• received 167 external responses, of which 136 were from individuals, 4 from charities, 12 from professional bodies in the tax and accountancy sector, 8 from tax agents, 7 from repayment agents, and 1 from a non-departmental public body

All respondents agreed with the statement of problems outlined in the consultation. Many individuals who responded had personal experience of using a repayment agent and some reported significant personal stress following these experiences. There was strong support from all respondents for government intervention.

Most respondents who were not repayment agents supported restricting assignments in some way. Most individuals and tax agents who expressed an opinion supported their prohibition. Professional bodies and charities expressed mixed views, with some supporting the removal of assignments, and others preferring the option to prescribe their format to include a consumer protection message. Most repayment agents, some professional bodies, and one charity expressed concern that restricting assignments could make their business model unviable.

Most individual respondents strongly supported the introduction of a standard pre-contractual disclosure form. Other respondents, while agreeing in principle with the need for greater disclosure, generally did not support the idea, raising concerns about its effectiveness and that it would be difficult for HMRC to enforce.

All respondents, across all categories, agreed that repayment agents should be required to register as tax agents with HMRC.

Respondents expressed mixed views on the approach to customer authorisation. Most respondents who expressed an opinion on the potential requirement for repayment agents to be formally authorised as their client’s tax agent via the existing ‘Authorising your agent’ form (known as the 64-8) or via the ‘digital handshake’ did not support the idea.

This was because the existing authorisation routes create an ongoing relationship between agent and customer. They do not reflect the ’one-off’ nature of transactions between a repayment agent and their customer.

However, there was a broad consensus that HMRC should require greater evidence of customer consent before processing a claim, with many individual respondents (charities, and professional bodies) expressing the view that a signature (either ‘wet ink’ or digital) alone was not sufficiently secure.

In addition to providing responses to the questions posed in the consultation, some respondents raised other areas that government should consider. These included HMRC undertaking advertisement campaigns to raise awareness that taxpayers can claim reliefs directly, including via social media. Some respondents made broader observations about the need for greater regulation of the tax advice market.

3. Next steps

HMRC has already taken action to tackle issues in the repayment agent market by:

• improving systems for customers to make a claim directly, with a new digital online service for income tax related claims

• raising awareness among customers of their entitlements and how to claim directly via communications campaigns and direct engagement with the healthcare sector

• making it easier for customers to raise concerns about repayment agents through a new reporting route (Reporting a repayment agent (office.com))

• creating a dedicated repayment agent taskforce to review the processes being used by agents to establish assignments to test that they create a valid legal assignment

Following this consultation, the government will take further steps to tackle the issues outlined and help restore taxpayers’ confidence in the tax advice market:

1. legislate to render void assignments of income tax repayments

2. immediately introduce new transparency requirements for agents in the HMRC Standard for Agents

3. explore introducing mandatory pre-contractual disclosure forms, and strengthen checks on repayment agents

4. undertake further work to strengthen the evidence that a claim has been made with a customer’s consent before processing it so we can improve the way in which customers authorise their agent

5. introduce a new requirement for repayment agents to register with HMRC as part of wider work exploring options to enhance the regulatory framework for tax advice and tax services

1. Render void assignments of income tax repayments

HMRC recognises the legal certainty that assignments provide to repayment agents, however many customers who enter into contracts with repayment agents do not understand the legal implications of entering into an assignment: that their rights to tax repayments are transferred to the repayment agent.

This means that where a repayment is subsequently issued, it legally belongs to the repayment agent, whom HMRC is obliged to pay. Once an assignment has been signed, it cannot be unilaterally rescinded by the taxpayer, as the repayment agent is now the legal owner.

The property law legislative basis for assignments, which dates back nearly 100 years, is such that there is no standard format for establishing them. This means that customers and HMRC are presented with a variety of differing formats of assignments making it difficult for HMRC to provide customer advice on the legal validity of assignments submitted.

HMRC consider that the suggested option of formally agreeing to assignments would not address the underlying issue that with no assignment standardisation, it is difficult for customers and HMRC to easily determine the true nature of the assignment. As such, HMRC consider that, given the level of scrutiny that would be required, formally agreeing to assignments would be too resource-intensive to be practical.

Therefore, the government intends to legislate to render void assignments of income tax repayments. The effect of such legislation will be that assignments of income tax repayments will have no legal effect and the repayment will remain the property of the customer.

HMRC does not want to make it more difficult for customers to claim repayment and recognises that some repayment agents provide valued services. Therefore, customers and repayment agents will be able to continue to use the separate nomination process which also enable repayments to be paid to the agent rather than the customer. This allows repayment agents to continue to collect their fees in advance of paying the customer. HMRC are also able to process claims with nominations more quickly than with assignments.

HMRC believes that nominations present a better and more equitable balance between customers and repayment agents: they still enable agents to receive repayments directly if that is what customers want, but they protect customers as they involve no legal transfer of rights and therefore can be unilaterally rescinded.

2. New transparency requirements in the HMRC Standard for Agents

Consultation responses overwhelmingly supported the need for greater transparency in repayment agent advertising and terms and conditions.

HMRC is today publishing an update to the Standard for Agents to clearly set out our expectations concerning transparency. New additions to the standard set out that HMRC expects all agents, including repayment agents, to:

• provide clients with relevant and material information before, during and, where necessary, after their engagement to clients of all relevant and material information before, during, and, where necessary, after their engagement

• make it clear on advertising material that the agent is not part of, or acting on behalf of, HMRC

• make the identity of the agent or firm clear, if known by a trading name or shortened version of the legal name

• before the terms of engagement, or any form of contract, are agreed, make sure the client understands:

  • how the agent is to be paid for their services
  • how any repayment that arises will reach the client and what conditions apply (if any)
  • details of deductions by the agent from any repayment that the agent handles for the client
  • the rights that both the agent and their client have to end the arrangement early or unilaterally

• comply with other relevant law, for example the Consumer Rights Act, the Consumer Protection from Unfair Trading Regulations, as well as the code drafted by the Committee of Advertising Practice

HMRC has a range of powers it can and will use where agents breach these standards, including refusing to deal with that agent. Where behaviour falls short of the standard, HMRC will work with the agent, and will pause processing their claims if they fail to improve.

HMRC will also work more collaboratively with other government agencies to ensure repayments agents are adhering to the necessary agent standards.

HMRC considers that a mandatory pre-contractual disclosure form would help improve transparency between repayment agent and customers. We are currently looking into effectively enforcing this requirement, to ensure it is consistent with our approach to registration.

3. Greater evidence of consent and strengthening agent authorisation

Existing HMRC processes for agent authorisation – such as the ‘Authorising your agent, (‘64-8’) form or the Agent Service Account ‘digital handshake’ – create an enduring relationship between agent and client, which most respondents considered was not appropriate in these circumstances. Currently, a customer cannot limit an authorisation to a specific repayment claim.

Consultation responses tended to focus on whether HMRC should do more to validate that any claims we receive have been signed with the customer’s intent, and not whether a repayment agent should be formally authorised as an individual’s tax agent.

HMRC recently set up a dedicated repayment agent taskforce to review the processes being used by agents to establish assignments to test that they create a valid legal assignment. HMRC will also review the sign-up processes used by repayment agents to ensure they meet the Standard for Agents, and enable the customer to give their informed consent.

HMRC believes that existing agent authorisation processes should be reviewed. Over 2023, HMRC will, work with agents, customers and the tax and business software community to develop a more modern approach through which customers can provide agents with permission, and which provides greater confidence to HMRC that the customer is aware and provides their consent. This will be particularly important where this includes a nomination to pay the repayment to someone other than the customer.

4. Introduce a consistent registration requirement for repayment agents

Currently, repayment agents are not required to register with HMRC so the department’s ability to proactively check they are registered for anti-money laundering supervision and that they meet the HMRC Standard for Agents is limited. The lack of wider regulation in the tax advice market means supervision of these businesses is minimal.

Unanimous agreement from respondents revealed that HMRC should require repayment agents to register with HMRC in a similar way to other tax agents who interact with HMRC currently, and for HMRC to hold a list of registered repayment agents, so taxpayers can use this to check if they are complying with basic obligations.

As set out in November 2021, the government has committed to exploring options to enhance the regulatory framework surrounding tax advice and tax services. As part of this, HMRC will introduce a new requirement for repayment agents to register with HMRC that will meet the needs of both repayment agents and HMRC, and support future strengthening of oversight of the tax advice market. Further details on the approach to registration for repayment agents will be set out in early 2023.

4. Further detail on the consultation responses received

The consultation received 168 external responses from 136 individuals, 4 charities, 12 professional bodies, 8 tax agents, 7 repayment agents, and 1 non-departmental public body. We held 8 meetings with external stakeholders, of which 3 were with professional bodies, 3 with repayment agents, and 2 with charitable organisations.

Why individuals use repayment agents and what HMRC can do to raise awareness that taxpayers can claim directly from HMRC

Question 1: What more could HMRC do to make taxpayers aware that they may be eligible for reliefs, and that they can claim directly from HMRC?

There was a consensus across respondents that HMRC should run advertisement campaigns to raise awareness that taxpayers can claim reliefs directly. Almost all respondents suggested HMRC advertise via social media. Other channels were frequently suggested, including TV, radio, newspapers, and through trusted influencers. One professional body noted that this should be ramped up at key points of the tax year.

Some respondents thought HMRC should make use of intermediaries such as employers and trade unions to raise awareness with their staff or members that they can claim refunds directly through HMRC.

Some professional bodies, and one repayment agent, thought HMRC should use data to identify individuals who are likely to be eligible for reliefs (based on the work they do) and send them correspondence with information about what can be claimed for, and how to claim directly. One repayment agent noted they pay considerable sums of money to access a target audience which HMRC is already aware of and has contact information for.

Professional bodies and charities emphasised that the complexity of the tax system was a barrier to individuals claiming directly.

One tax agent suggested creating a page on GOV.UK with a list of jobs which a lot of people perform, which would lead to a list of common types of associated expenses claimed.

Question 2: What improvements to the process of claiming reliefs could HMRC make that might encourage taxpayers to claim directly?

All respondents recommended HMRC review and simplify both the claims process and related guidance on GOV.UK. The current approach was cited as confusing and seen as unnecessarily complex when compared to the processes used by repayment agents. Specifically, they thought that HMRC should:

• review digital customer journeys to ensure they are straightforward and linear

• ensure plain English is always used

• make guidance as simple as possible, and remove unnecessary information

• ensure guidance covers all types of reliefs that can be claimed. One respondent cited the absence of Marriage Allowance on the main claims page

• learn from the comparative simplicity of the processes used by repayment agents review printed claims forms to ensure they are simple to complete

• produce step-by-step guidance, both written and in video format, that taxpayers can use to guide them through the process

• provide real-world examples of the reliefs that individuals can claim for

• ensure existing material looks modern and appealing

Most professional bodies, charities, tax agents, and some individuals stated that accessing and using the Personal Tax Account was a significant hurdle for individuals who have limited digital skills or do not have the relevant documentation to verify their identities. Some respondents proposed creating a separate portal for people who are unable to sign up to a Government Gateway account.

Some respondents thought long waiting times for customers to speak to an adviser on HMRC’s phone lines deterred customers from claiming directly or seeking support was pushing people towards repayment agents.

One tax agent suggested HMRC provide an eligibility checker to help individuals determine if they have a valid claim outside of the claims submission process. This followed the view that individuals can be put off from claiming if they think they’ll make an unjustified claim which could have negative consequences for them, so they use a repayment agent based on the assumption they will review and validate their claim before it is submitted.

Issues in the repayment agent market including consumer protection

This chapter covered issues in the repayment agent market and asked respondents for their experiences and if they agreed with HMRC’s assessment of the issues. It cited three main areas of concern:

• misleading advertisements and lack of transparency about the terms and conditions and the services provided

• repayments being made to third parties rather than the taxpayer, in particular the use of assignments

• high volume of speculative claims where no repayment is due, resulting in delays processing genuine claims more quickly

Although HMRC has received a considerable number of complaints about the above issues, supported by consultation responses, we acknowledge that many taxpayers value the services provided by repayment agents, and enter agreements with full knowledge of the contractual terms.

Question 3: For taxpayers: What experiences have you had in interactions with repayment agents?

Question 4: For all respondents: Do you agree with our assessment of the issues?

Respondents overwhelmingly cited negative experiences with repayment agents, either directly or indirectly, and agreed in full with the problem statement outlined in the consultation. This included some repayment agents, who had seen poor practice from other repayment agents. Many individuals cited significant personal stress following these experiences, and there was a strong call for HMRC to address these issues.

These experiences aligned with those cited in the consultation, namely:

• individuals being unaware that they were entering a contractual agreement, with many individuals stating they had never given the repayment agent permission to claim on their behalf

• individuals being unaware of the terms and conditions to which they were agreeing, usually because these were never prominently displayed

• individuals being unaware their repayment would be sent to a third party

• assignments being seen as unfair contractual terms

While 134 individuals agreed with the problem statement, 2 did not agree, with one clarifying that they were happy with their experience and the service they received.

Repayment agents, some professional bodies, and one charity stressed that not all repayment agents engage in poor practice. These respondents thought repayment agents filled a genuine gap in the market and could provide a useful service to taxpayers who may otherwise be unaware they can claim, or that have had difficulties claiming directly.

Some professional bodies noted that they thought most repayment agents did not belong to professional bodies, and that professional bodies have clear rules concerning both disclosure and the handling of client money which would prevent the issues outlined in the consultation.

Question 5: For repayment agents: Do you think our assessment of the issues is fair?

While all repayment agents recognised the issues outlined in the consultation, they thought these stemmed from a minority of poor agents and did not represent the wider industry. They did not think HMRC was recognising the value they can add in helping taxpayers secure refunds. In addition to providing straightforward customer journeys, they felt that many taxpayers would not have claimed at all were it not for their advertising.

Most repayment agents also stated that HMRC’s concerns about high volumes of ineligible claims was unfair, given that they only submit claims from customers who answered a series of questions that suggest they will be eligible to claim. This was seen as an HMRC issue rather than one that impacts customers.

Some repayment agents thought the sample size used in the Kantar research, which the consultation cited, was too small to draw conclusions about the market. While this research informed our thinking, it is qualitative evidence from which no statistical conclusion has been drawn, and which forms part of a wider evidence base including complaints data and calls to HMRC’s contact centres. HMRC has received over 2,200 complaints about assignments since January 2022.

One agent who focused on overseas VAT repayments recognised the issues, but did not think they applied to VAT repayments.

Question 6: For all respondents: Have you seen any other issues with repayment agents?

Respondents raised a wide variety of issues other than those raised in the consultation. These fell into a few categories:

Advertising:

• inflated or unrealistic refund amounts

• not being clear they are from a private company rather than HMRC

• unsolicited phone calls and emails, sometimes with aggressive or misleading sales techniques

• marketing and lead generation companies selling claims to repayment agent firms, which can be confusing for individuals

Consent:

• stating that claims had been made without their permission, with some alleging the repayment agent had forged their signature

• individuals thinking they were completing an eligibility check rather than entering a contractual agreement. Some had been told they would need to pay significant administrative fees if they did not subsequently complete and return a claims form

• the apparent sale of customer information between companies, particularly concerning Payment Protection Insurance (PPI) tax deductions

Customer service:

• being unable to contact the repayment agent after lodging a claim, either for general customer service enquiries or to ask what had happened with their payment

Where repayments are issued:

• individuals not understanding why their refund has been paid to a third party

• individuals not understanding where their refund has sent, usually where the P800 form specifies the payment has been sent to a company with a name similar to an HMRC function, and due to the P800 form not being clear that this is a third party

• not receiving repayments at all, despite receiving a P800 form

Other:

• repayment agents asking for an individual’s government gateway details

• concerns about whether the processes used by repayment agents generated legally valid assignments

• concerns about whether repayment agents were trading in compliance with anti-money laundering requirements

• concerns about claims being submitted based on poor technical knowledge, or with no supporting evidence, resulting in taxpayers being refunded they will later have to pay back (minus fees, leaving them out of pocket)

Options for going further

Question 7: How should HMRC ensure that repayment agents are adhering to existing consumer rights legislation?

Proposed measures on disclosure

Suggestions from respondents fell into 2 main categories:

1: Work with relevant authorities

Several professional bodies supported HMRC’s working with the Advertising Standards Authority. One thought that HMRC should work with the Advertising Standards Authority to produce an enforcement notice for the repayment agent sector, citing that this had been done for the promoters of tax avoidance.

Repayment agents expressed mixed views. Broadly, they did not think it was HMRC’s role to police consumer rights legislation. However, they agreed that HMRC should make referrals to relevant authorities where appropriate.

2: Regulate the market

Around half of individuals who answered this question thought the market should be formally regulated. Various forms were suggested, including statutory regulation by existing regulators, or an HMRC operated licensing regime. One respondent thought HMRC should take a greater role in enforcing its existing Standard for Agents.

This view was echoed by several tax agents, who thought that the issues outlined in the consequence mainly arose from agents who do not belong to professional bodies, and that compulsory professional body membership was an appropriate solution.

Several professional bodies thought that requiring all tax agents, including repayment agents, to belong to a professional body was a solution to these issues, citing the clear rules on disclosure and letters of engagement that these bodies set and ensure compliance with.

One repayment agent suggested the market be regulated by an impartial third party.

Question 8: Is there any more HMRC should do to help consumers make informed choices about whether to use a repayment agent?

Several professional bodies thought that requiring all tax agents to belong to a professional body and thereby introducing a uniform regulatory framework with clear standards would tackle the issue. This was seen as reducing the significance of the choice and the potential risk that a taxpayer could pick a bad agent in the first place.

One professional body thought HMRC should make clear to the public that the provision of tax services is not currently regulated like many other professional services, which is a common misconception amongst the public.

Two charities thought HMRC should issue guidance on what good practice looks like in the repayment agent sector. One thought that HMRC should contact individuals on receipt of an assignment to ensure they understood the terms and conditions to which they’d agreed. This would also provide a chance for HMRC to inform taxpayers they can claim directly.

Most repayment agents thought the tone of this question was negative, and downplayed the value repayment agents can add, as it implied that an informed consumer would not choose to use a repayment agent.

Question 9: Should HMRC consider introducing measures which would require repayment agents to display material information before a contract is considered valid, such as a pre-contractual disclosure form?

There was a unanimous response from individuals that HMRC should ensure repayment agents display material information before a contract can be entered. This followed unanimous agreement that there was an issue with poor disclosure of such information in the market.

Professional bodies expressed mixed views. Most did not support the measure, even though they agreed with the principle that disclosure was important. The reasons for this included concern that:

• individuals would not read or make use of the form
• it would be difficult to enforce
• it might apply to the wider tax advice market, which was seen as unnecessary
• it might introduce a barrier to people claiming if the form was too complex

Some professional bodies favoured a more formal regulatory approach, with compulsory professional body membership for those providing tax services or advice. They cited the clear rules on letters of engagement set by most professional bodies.

Professional bodies supporting the measure thought it would be beneficial but caveated that it should only apply to repayment agents, and not the wider tax advice market.

Charities who answered this question agreed with the measure. They thought if such a form was introduced, it should be standardised and made as simple as possible. One stressed the need for strong enforcement of such a requirement on HMRC’s behalf.

Almost all repayment agents thought this form should not be introduced. While they agreed in principle that material contractual information should be displayed, they thought this was a matter for existing bodies such as the Advertising Standards Authority and Trading Standards. They saw the form as an unnecessary administrative burden which good agents would already be trading in line with, but poor agents would ignore.

One repayment agent agreed that this form should be introduced to ensure consumers understood what they were signing up to. Another thought that if it was introduced, agents should be able to decide the layout of such a form so they could implement it within their individual systems.

Most tax agents agreed with the measure as they thought it was important that terms are made clear to potential customers. One was unsure whether taxpayers would actually read or make use of such a form.

Proposed measures to restrict the use of assignments

Question 10: Should HMRC legislate to restrict the use of assignments?

Question 11: Should restriction comprise prohibition of the use of assignments of tax repayments or some form of limited restriction?

Question 12: If limited restriction, do you favour either option b or c outlined, or do you think another form of limited restriction would be better?

Question 13: If you are an agent and use assignments, which areas of tax do you do this in, and why?

Question 17: Do you think prohibiting assignments would address the consumer protection issues cited above?

Question 18: Do you think restricting assignments would address the consumer protection issues cited above?

Repayment agents

We received written responses from 7 repayment agents, of which 4 routinely used assignments, one used them in rare instances, and 2 did not use them.

Repayment agents who used assignments said the main reason they did so was to guarantee payment for their work. They cited 2 main reasons as to why the assignment was necessary. First, they were concerned about clerical errors in which HMRC does not correctly pay the assignee (or nominee), usually paying the taxpayer directly instead. One repayment agent cited an error rate of over one in 10 claims. Without an assignment in place, HMRC will not ‘rework’ the claim and reissue the payment to the agent. Repayment agents that used assignments were concerned this would impact their profitability and potentially make their business unviable.

The second reason agents used assignments was that when a nomination is used, a taxpayer could intervene to cancel the nomination following notification that a refund is due. The extent to which this happens is not clear, and this concern was secondary to the issue of HMRC error. However, some repayment agents were concerned this could also impact their profitability.

One repayment agent stated they only use assignments in the rare circumstance in which they pay a portion of anticipated refund to a taxpayer in advance of receiving payment from HMRC. In these cases, the assignment would guarantee subsequent payment.

One repayment agent stated they had stopped using assignments, citing the consumer protection concerns outlined in the consultation. However, they did state that providing the taxpayer is aware the repayment will be issued directly to the agent (via nomination), they thought this was not an issue.

No professional bodies were aware that their members used assignments at any scale.

One tax agent stated they used assignments in very rare circumstances.

Most repayment agents did not support prohibiting or restricting assignments. They did not think it would address what they saw as the primary issues of misleading advertising, unclear contractual terms, or poor customer service. Two repayment agents thought the problem was not assignments, but that HMRC was not doing enough to check the underlying processes used by repayment agents to generate them.

Repayment agents who used assignments saw their removal as a threat to the viability of their business, while repayment agents who did not use them did not express these concerns.

One repayment agent favoured prohibiting the assignment of tax repayments, agreeing with the problem statement outlined in the consultation. They did not think a limited restriction would be sufficient to address the consumer protection issues. Another supported a limited restriction, proposing that assignments only be allowed for a small percentage of claims. One repayment agent was not strongly opposed to a standardised format, providing it was not too complex, although they did not prefer this to the status quo.

Individuals

All individual respondents who answered this question were in favour of restricting assignments. These responses conveyed considerable strength of feeling that assignments are unfair contractual terms, compounded by concerns about poor disclosure of their existence and implications. This is mirrored in formal complaints, with HMRC receiving over 1,800 since January 2022.

Most individuals who expressed an opinion on how assignments should be restricted supported removing the ability to assign repayments altogether, which was seen as tackling the problem entirely. Others wanted HMRC to do more to ensure individuals understood what they were signing up to before processing an assignment.

Many of these responses directly referenced the need for repayment agents to clearly and prominently state when an assignment will be used and what that means in practice for the individual. This particularly related to situations in which an individual has used a repayment agent to claim a single, specific relief but had additional, unrelated payments also sent to the agent; payments to which the agent was legally entitled due to the assignment covering all repayments for that tax year.

Professional bodies

Professional bodies agreed that HMRC should do something to address consumer protection issues with assignments but expressed mixed views on how this should be done. Most favoured outright prohibition of assignments, with the caveat that HMRC must ensure that this would not make the repayment agent business model unviable.

Reasons for supporting prohibition were that it would be most beneficial to consumers, and that more limited measures might be complex or costly for HMRC to administer. Some professional bodies that supported the prohibition of assignments noted that this alone would not tackle other issues such as poor disclosure of contractual terms.

Some professional bodies preferred a prescribed format. They thought this would deliver consumer protection benefits without constraining the flexibility of repayment agents to use assignments where appropriate. One thought that HMRC should operate a twin-track approach, whereby HMRC would prioritise the processing of prescribed-format assignments, and in cases where non-prescribed format assignments were received, contact the assignor to confirm their intent before processing.

Nobody preferred the option of HMRC having to agree to the assignment. Although this was seen as beneficial, respondents agreed it would be unfeasible for HMRC to administer.

Charities

Charities expressed mixed views. Two thought HMRC should prohibit the assignment of income tax repayments as they’re unfair contractual terms which individuals do not understand they are signing up to.

One preferred prescribing the format of an assignment, using simple language and making it clear that this is an HMRC document. They echoed concerns raised by repayment agents that rendering void assignments may affect the viability of the business model, which they were concerned could prevent some individuals from claiming at all.

Other tax agents

All tax agents agreed that assignments were problematic for customers. Most expressed a preference for their prohibition, while one supported a prescribed format.

One tax agent made clear that if HMRC prohibits assignments, it needs to make clear that this will not affect the use of non-binding nominations. They cited the importance of nominations for expatriate employees who nominate tax refunds to their employers under tax equalisation arrangements. They expressed concern that if prohibiting assignments led to the use of nominations, this could result in HMRC later prohibiting nominations, which they thought would negatively affect a wide range of legitimate users.

Question 15: What impact would a prohibition of assignments have on your business?

In line with responses to question 13, those agents who routinely used assignments expressed concern that prohibiting assignments would severely impact their profitability and could potentially put them out of business.

One repayment agent said that they would no longer be able to advance a percentage of an anticipated repayment if they could not use an assignment to guarantee they would receive the future repayment, although they did this infrequently.

One agent said there would be a limited impact on their business, as they very rarely use them.

Question 16: What impact would a limited restriction of assignments have on your business?

This question received mixed responses, depending on the repayment agent’s view of what a limited restriction could look like. One repayment agent was supportive of a prescribed format of assignment, although they thought it might add cost and complexity. One repayment agent expressed concern that a limited restriction might also impact on the viability of their business.

Repayment agents wanted assurance that HMRC would not make errors when processing nominations, so that they would always be paid when one was used. Some thought HMRC should rework errors made under a nomination in the same way that HMRC currently does under an assignment.

Question 14: If you are an agent, are there any improvements to the nominations process that would make them more appealing?

Some repayment agents suggested making payments electronically so the agent would receive the repayment immediately, and a taxpayer could not intervene and divert it.

One professional body thought HMRC should issue the repayment at the same time as the P800 form, removing the existing 14-day delay, which they thought could encourage taxpayers to withdraw the nomination.

Proposed measures to require repayment agents to formally register with HMRC and strengthen evidence of authorisation by customers

Question 19: Should we require repayment agents to register with HMRC via the Agent Services Account before processing any claims the submit?

All respondents who answered this question, from all sectors, agreed that HMRC should require repayment agents to register with HMRC via the Agent Services Account. This was seen as providing additional security through increased checks on agents, and that it would help ensure compliance with anti-money laundering requirements. It was also seen as being in line with existing expectations for tax agents who transact with HMRC.

Several professional body respondents stated that HMRC should also require repayment agents to cite their Agent Reference Number on the claims they submit.

Question 20: Should we require repayment agents be authorised by their clients with HMRC before they can do so?

Question 21: If you are a repayment agent, what impact would a requirement for formal authorisation by your clients have on your business?

Question 22: Should this requirement apply only where repayments are paid directly to the agent (including via nomination), or in all cases?

These questions received mixed responses. While all individuals supported this measure, responses focused on the level of evidence of customer consent that HMRC should require before processing a claim, and not formal authorisation as a tax agent. There was a strong call for HMRC to require more evidence than a signature before processing a claim.

Professional bodies, charities, and tax agents expressed mixed views. Although they supported the idea in principle, they did not think that existing authorisation routes were fit for purpose. This was mainly because authorisation is an enduring relationship that provides a lot of information about the taxpayer to the agent; neither of which they thought was appropriate given the one-off nature of the transaction, nor did they think customers would want this. Concern was expressed that some individuals might not know how to remove the authorisation.

Various improvements to the current authorisation process were suggested. These included HMRC creating an authorisation form specifically for repayment agents which would provide more granular access to customer information, and improvements to the digital handshake process to make it easier for customers to understand.

Most respondents thought this requirement should apply in all cases, not only when the repayment is issued directly to the agent.

Repayment agents were widely opposed to the idea. They expressed concern that current authorisation processes were time-consuming and confusing and were worried that such a requirement would negatively impact their businesses as they might struggle to get customers to authorise. They were particularly concerned about digital authorisation and thought that a digital-only requirement could put them out of business as they would not be able to help their customers navigate it at scale.

One repayment agent who focused on Corporation Tax reliefs noted that their authorisation would override and remove the authorisation of any existing tax agent (who is likely to provide wider accountancy services), which they did not think their customers, or the existing agent would want.

Question 23: Do you have any other views on the issues or potential measures regarding repayment agents?

Closing questions

Professional bodies and tax agents suggested a range of measures, including:

• formal regulation of the tax advice market, with most suggesting compulsory professional body membership, and others a licensing regime

• always paying individuals directly, prohibiting both assignments and nominations

• requiring repayments be paid into a dedicated client bank account

• writing to individuals after receiving a claim via a repayment agent to make them aware they can claim directly

Question 24: Have you seen evidence of a consumer protection issues with repayment agents concerning heads of duty other than Income Tax?

Responses from professional bodies cited ‘Research and Development’ (R&D) as an area of concern, where they had seen specialist firms encourage claims with no sound basis. They thought this was compounded by HMRC’s ‘process first, check later’ approach, which could leave businesses being asked to pay the entire sum back to HMRC, but without being to claim back the fees charged by the agent. One charity also cited R&D.

One professional body cited poor practice concerning Multiple Dwellings Relief for Stamp Duty Land Tax, with firms encouraging claims with no sound basis.

Question 25: Do you think measures proposed in this consultation could, or should, apply to other areas in which repayment agents act?

Question 26: Are there other legal vehicles not mentioned that could give rise to unfair contract terms for taxpayers?

Some professional bodies identified concerns about practices in the Research and Development market. These typically related to poor quality work and ineligible claims, rather than issues concerning assignments, disclosure, or registration. There was a general view that if any measures from this consultation would be useful in tackling those issues, they should apply where relevant.

One respondent suggested that when HMRC closes down some routes, some repayment agents may use the contractual agreement as a method of threatening taxpayers with legal action over unpaid fees where the individual tries to cancel.

One charity raised concerns about a repayment agent practise whereby an individual completes what they believe to be an enquiry form, or ‘free calculator’, but is then threatened with an administration fee should they not complete the subsequent claim form. This was seen as an issue of misleading terms and conditions.

Annex: List of stakeholders consulted

There were 167 respondents in total:

• TaxAid and Tax Help for Older People

• Low Incomes Tax Reform Group (LITRG)

• Royal National Institute of Blind People (RNIBP)

• Information Commissioner’s Office

• Association of Accounting Technicians (AAT)

• Association of Chartered Certified Accountants (ACCA)

• Association of Taxation Technicians (ATT)

• Chartered Accountants Ireland (CAI)

• Chartered Institute of Taxation (CIOT)

• Chartered Institute of Payroll Professionals (CIPP)

• Federation of Small Businesses (FSB)

• Institute of Chartered Accountants in England and Wales (ICAEW)

• Institute of Chartered Accountants of Scotland (ICAS)

• Institute of Financial Accountants (IFA)

• Law Society of Scotland

• The Society of Pension Professionals

• NJB Taxback Ltd

• Empower RD

• Online Tax Rebates

• RIFT

• Tax Rebates Ltd

• Tax Returned

• The Claim Guys Legal

• DSSBH

• Saffrey Champness

• TEVEA International

• Vialto

• Vlora Plus

• We Luv Tax

• 2 individual tax agents

• 136 individuals