A BBC Radio 4 Money Box investigation has discovered that the number of people complaining to HMRC about companies claiming tax repayments on their behalf has risen eight-fold in three years; with most complainants saying that this is happening without their knowledge or consent.
HMRC admits that they have significant concerns about many firms that have set themselves up as specialised repayment agents and is considering its next steps. They have also said that from a base of 246 complaints in the whole of 2019, that there have been over 2,000 complaints in the first 7 months of 2022 so far.
Tax Repayment Agency Complaints: Deeds of assignment
The main issue is about what are called “deeds of assignment”, which is when a person signs over their right to something, invariably money related, to someone else to claim on their behalf. When used properly by legitimate tax repayment companies, they can often help people get money they probably wouldn’t otherwise manage to claim for.
However, the market is unregulated and open to abuse and unfortunately for many individuals who respond to the slick advertising of the repayment agents, they often do not realise that it is impossible for them to break the agreement, which can only be done legally, if both parties agree to do so.
Tax Repayment Agency Complaints: William Myers – a case study
William Myers and his wife are happily retired and neither of them have any regular dealings with HMRC, but out of the blue in July William received a letter from them. The letter explained the £986 of marriage allowance John had claimed for would be paid, as he’d requested, to a tax repayment company.
This was a shock to William as he wasn’t aware he’d overpaid tax, he’d had never heard of the company involved, had not claimed the money and, two months on, has still not seen a penny of it. “I’m always very careful to fill in all my income tax and any other form and keep copies so I spoke to my wife and said ‘what on earth’s going on, we haven’t done anything about this. We’d better find out what’s going on.'”
Tax Repayment Agency Complaints: The plot thickens!
William then spent several weeks trying to contact the company HMRC told him it’s paid his money to. He’s heard nothing, got nowhere and has no idea when he might see any of his money. “I wondered how on earth can this deed of assignment had been made, I haven’t given them permission to take money from HMRC and put it into their bank account instead of mine”.
“I am absolutely certain that we have never asked for a deed of assignment and I’m absolutely sure I would never have forgotten giving someone else the opportunity to take all this money from me. I am now sure that what’s happened is fraud.”
Tax Repayment Agency Complaints: Unregulated sector
Regrettably, as a consequence of the tax repayment sector being unregulated, it can be abused by some companies operating among the legitimate ones. Lots of individuals knowingly sign up with a repayment company, get their tax refund as expected, minus an agreed fee and move on, but for many others there’s nothing but confusion and worry.
HMRC says it recognises there are significant concerns around the use of repayment agents and, earlier this summer, it launched a review on how to better protect taxpayers who use them and recently said that it is currently “analysing the responses to that consultation and considering its next steps”.
Tax Reform Group Submission
Joanne Walker is from the Low Incomes Tax Reform Group, which recently made a submission to HMRC as part of its review of the unregulated sector, said: “This is concerning but it isn’t really a surprise, it chimes with what we’ve been seeing over the past couple of years.”
She added that some companies are “being unresponsive, charging really high fees, making over-inflated promises, having unclear or hidden terms and conditions. Also, we’ve seen a lot of social media advertising, which will include an online inquiry form suggesting someone should tick if they’re eligible.”
Tax Repayment Agency Complaints: You must read the terms and conditions
The advertising is often very slick are usually targets retirees who, in most cases, have no regular contact with HMRC and usually have no idea what allowances are potentially available to them. The inquiry form on the website often has a tick box and if they tick that box, it can often result in them signing up to various terms and conditions.
Unfortunately, with the more unscrupulous firms, this can often lead to the generation of an application and a deed of assignment even though the taxpayer thinks that all they have done is make an inquiry.
“We’ve asked HMRC to stop accepting the deeds at face value because some of them may have been generated fraudulently. This can be easily done by simply checking with the taxpayer if there is a deed of assignment and if they understand what it means, ” said Joanne Walker, who added that if HMRC took this simple step, it would pretty much solve the problem.
Tax Accountant’s view
This investigation by Money Box is very disturbing, especially as the more unscrupulous firms are targeting the most vulnerable group in our society, the elderly. This group are usually quite trusting and may not realise that by ticking a box to avoid reading through an interminable list of terms and conditions, that they may inadvertently be signing up what amounts to a scam.
My advice to anyone who is tempted by the promise of a tax refund that you didn’t know you were eligible for, is that you must read the terms and conditions and if it isn’t clear what you’re signing up to, don’t!