Repayment Agents

In recent months our helplines have been busy with callers complaining about repayment agents. The business practices of some repayment agents can leave vulnerable taxpayers losing a significant proportion of their refund, or with a tax bill, and we have heard first hand from our callers the financial hardship this can cause. 

Often people are tempted by online advertising that promises a tax refund and the repayment agent websites make it really easy to sign up to their service. In contrast, HMRC’s website can be difficult particularly for older taxpayers who may not have the ID documents needed to obtain a Government Gateway account. This is particularly frustrating as one of the most frequent claims by older eligible taxpayers is for marriage allowance, which incidentally is not on the list of common claims on HMRC’s website. Further confusion is created by letters that some of our callers have reported receiving several years after a PPI claim pushing them to make marriage allowance transfers because, “time is running out”.

The agents make the sign-up processes so simple that most of our callers are adamant that they did not sign up to an agent. One caller told us that he had put a few details into a website (clicked through from a Facebook ad) to check whether he was entitled to marriage allowance. He inputted some information to check, but when he realised, he wasn’t eligible he left the site. A few weeks later he was shocked to receive a letter from HMRC saying a repayment for, what he knew to be an incorrect claim, was being sent to the agent.

Frequently callers have unwittingly “signed” deeds of assignment covering the four previous tax years by ticking a terms and conditions box, meaning that any refunds for those years will be paid to the repayment agent even when the refund is being generated by HMRC’s PAYE reconciliation process.  

So, this simplicity has a price, and the agents often charge a fixed fee as well as a percentage of the total refund. A typical example is a fixed fee of £100 plus 42% of the refund which for those on low incomes is very expensive compared with claiming free on HMRC’s website. HMRC will process the claim and check later, and if they disallow some of the claim they will write to the taxpayer and demand repayment of some of the refund. In the worst cases, the amount that HMRC are demanding is more than the refund (if anything) they received because of the high fees. Sometimes the repayment agent no longer exists, and the taxpayer can’t pay the tax now demanded by HMRC. 

These are distressing calls as often there is little we can do to help because the tax position is correct. We have however been using the evidence from our helplines to inform our response to the recently issued HMRC consultation. 

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This entry was posted on Thursday, October 6th, 2022 at 12:18 pm and is filed under Tax Blog. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.