The government is making it harder for companies to get away with taking too much money from people's tax refunds. They're introducing rules that will make it easier to see exactly how much money is being taken, and they're making it illegal for companies to take a large chunk of someone's refund without telling them. This means people will be able to keep more of their money.
To facilitate this, HMRC will implement the following changes for tax refund agents:
- Add rules to make it illegal to pass income tax refunds to someone else.
- Require agents to be more open about how they do their job. They must be clear about what they are doing and provide information to their clients quickly. This is a new rule that everyone in the HMRC Standard for Agents must follow.
- Making sure that the customers of tax agents agree to having taxes claimed on their behalf before it any work is undertaken.
- Making it compulsory for tax agents to register with HMRC.
Victoria Atkins, the financial secretary to the Treasury, revealed that the responses to a government consultation on tax refund agents showed that some people using the tax refund services were not clear about the details of their contracts. This meant that some taxpayers didn't realise they were not dealing with HMRC directly but instead with a third-party.
More and more people are using repayment agents to get money back from taxes they paid. These agents advertise on websites and social media, and people who don't know they can get the money back for free from the government may use the agent. The agents will then charge a commission, which can be between 10-50% of the refund. They may also try to get commission on future claims the person makes.
In May 2022, the government made it necessary for people to use the P87 form to get tax reliefs and expenses. Before this, people were using customised claim forms from tax refund companies. Unfortunately, these forms sometimes asked people to sign deeds or letters of assignment without making it clear what they were doing.
Companies like Tax Credits Ltd had tricked claimants into giving away a large part of their refund as commission to the agent - leading to the Taxman having to intervene and refund thousand of their claimants directly.