Registration of Tax Repayment Agents a welcome move – but more to be done

The Low Incomes Tax Reform Group (LITRG) has welcomed the announcement1 that repayment agents will be required to register with HMRC – a further step aimed at protecting taxpayers who use agents to help them claim tax refunds. However, LITRG has questioned how HMRC will enforce this measure and warned that problems with certain high volume tax repayment agents mean there is more HMRC should be doing to tackle questionable practices in the industry. 


From 2 May 2023, repayment agents will have 3 months to register with HMRC if they want to submit income tax or pay as you earn (PAYE) repayment claims on behalf of others and charge a fee for doing so. From 2 August 2023, if they do not register, HMRC say they may consider taking action.


Joanne Walker, LITRG Technical Officer, said: 


“We are pleased that the government has taken promised steps to tighten up the tax refund company market by making it a requirement for tax agents who want to charge for submitting income tax repayment claims to register with HMRC for an agent services account.


“However, HMRC need to clarify how they will identify those companies who fail to meet the requirements and confirm what specific action they will take in those cases.


“There is also more that HMRC could be doing to raise awareness of tax refunds, ensuring it is as simple as possible for taxpayers to claim them direct from HMRC, and to crack down on unscrupulous practices.


“Other issues associated with certain tax refund companies that we have previously raised include people saying that they have mistaken refund companies for HMRC, refund companies being unresponsive when taxpayers try to contact them and concerns about the protection of personal data.


“To help them identify bad actors, it is essential that HMRC use the information provided by agents when they register. If HMRC spot agents that fall short of their standards for agents, they should take action to protect taxpayers, including refusing to deal with the agent in appropriate cases.”


Joanne Walker continued: 


“HMRC also need to monitor the effect of this measure on the tax refund company market. There is a real risk that these changes could lead to changes in behaviour by some tax refund companies that have a detrimental effect on taxpayers.


“In particular, we are concerned that it could lead to an increase in certain tax refund companies asking taxpayers to hand over their Government Gateway or Personal Tax Account login details. This means that the taxpayer may not see any claim that is made via their account and HMRC may not be aware that it has been submitted by a refund company. HMRC tend to process refund claims and sometimes only check them at a later date. Where inflated claims are made in this manner, HMRC will chase the individual taxpayer for the excessive tax refund, including any amount taken as a fee by the refund company.


“Taxpayers should never hand over these details to anyone – tax agents registered with HMRC can file Self-Assessment tax returns on behalf of their clients using their own ‘agent’ credentials – they do not need to ask for individual taxpayers’ login details.”