Policy paper

Rendering void assignments of income tax repayments

Published 15 March 2023

Who is likely to be affected

This measure will apply to individuals entitled to income tax repayments from HMRC who wish to use a business, accountancy firm or agent to facilitate their access to a repayment. It will also affect the facilitating businesses, accountancy firms and agents.

General description of the measure

This measure removes a taxpayer’s ability to legally assign to a third party their income tax repayment, or their right to an income tax repayment. The effect of this measure is that assignments of income tax repayments will have no legal effect and the repayment will remain the property of the taxpayer.

Policy objective

This measure supports the government’s objectives to make tax fairer, simpler, and to protect consumers.

The government is also committed to maintaining trust in the tax system and protecting taxpayers, ensuring, where taxpayers are entitled to claim a tax repayment or a relief, they can do so freely and easily. Whilst agents can provide a valuable service to taxpayers, there has been growing concern around consumer protection issues in the repayment agent market.

Background to the measure

Many repayment agents currently require their clients to sign assignments which transfer legal entitlement to the income tax repayment to the agent. These arrangements have been exploitative as many taxpayers do not understand the consequences of what they are signing, not least that an assignment cannot be unilaterally rescinded. Legally binding assignments ensure that repayment agents are paid the fees they charge their clients, which are often excessive. Their use also allows repayment agents to benefit from other repayments that their clients are not aware of.

This measure arose from the call for evidence on Raising Standards in the Tax Advice Market published in March 2020, during which concerns were raised by consumer protection groups about the use of assignments by repayments agents.

A consultation document was published in June 2022, titled ‘Raising standards in tax advice: protecting customers claiming tax repayments.’ The consultation sought views on a number of proposals including whether the government should restrict the use of assignments. Most respondents were in favour of a legislative change. The government response, which announced the intention to legislate, was published on 11 January 2023.

Detailed proposal

Operative date

The measure will have effect on 15 March 2023 and will affect assignments of which notice is received by HMRC on or after that date.

Current law

Assignments, comprising statutory assignments and equitable assignments, are a concept of property law. In England and Wales, the Law of Property Act 1925 S136: in Northern Ireland section 87 of the Judicature (Northern Ireland) Act 1978 and in Scotland, the Transmission of Moveable Property (Scotland) Act 1862.

Proposed revisions

The legislation is to be introduced in Spring Finance Bill 2023 and have UK-wide application. The legislation does not amend property law, rather it renders void any assignment of an income tax repayment notice of which is received on or after the commencement date.

Summary of impacts

Exchequer impact (£m)

2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028
—	negligible	negligible	negligible	negligible	negligible

This measure is expected to have a negligible impact on the Exchequer

Economic impact

This measure is not expected to have any significant macroeconomic impact.

Impact on individuals, households and families

This proposal is expected to impact on an estimated 400,000 taxpayers. The measure removes the ability to use assignments to legally transfer their income tax repayments to a third party. Removing the ability to use assignments supports taxpayers having better-informed choices, including making claims for themselves or finding an agent who charges fees reflecting the value of the work undertaken.

Taxpayers who do not wish to deal with HMRC directly will still be able to use an agent to claim repayments on their behalf, and for the repayment to be made to the agent, but by using nominations, which are not legally binding, and which they can easily rescind. Those who choose to make claims on their own behalf will benefit from the full repayment amount without the costs incurred by instructing a repayment agent.

The measure is not expected to impact on family formation, stability, or breakdown.

Customer experience of HMRC is expected to remain broadly the same as it does not alter how individuals interact with HMRC. Clear guidance is already freely available, although additional communications will be published to ensure that customers are fully aware of their options. Customer experience with repayment agents is expected to improve as individuals will no longer be legally bound by agreements, the consequences of which they do not fully understand.

Equalities impacts

It is not expected that there will be adverse effects on any group sharing protected characteristics.

Impact on business including civil society organisations

This measure will have impact on an estimated 200 repayment agents by requiring them to use nominations rather than assignments. This may have a financial impact on the repayment agents who use them, although not all repayment agents currently use assignments.

Continuing costs are expected to be minimal.

This measure is not expected to impact civil society organisations.

This measure is expected overall to have no impact on business experience of dealing with HMRC as it does not change any processes or tax administration obligations.

Operational impact (£m) (HMRC or other)

HMRC do not expect to incur any additional costs as a result of this change.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be kept under review through communications with affected taxpayer groups.

Further advice

If you have any questions about this change, please contact Christiana Daly on 03000 594708 or email: tapstechnicalconsultation-assignment@hmrc.gov.uk