HMRC launches consultation to address concerns about paying agents

New measures to stop rogue agents taking advantage of people and pocketing their tax refunds have been proposed by HM Revenue and Customs (HMRC).

HMRC recently launched a 12-week consultation, Raising Standards in Tax Advice: Protecting Clients Claiming Tax Refunds, to consider ways to better protect taxpayers from paying agents making routine tax claims on behalf of people, but they can take up to half, or even more, of the payment.

Taxpayers can use disbursing agents to make tax refund claims, and many are satisfied with the service they receive. On the other hand, many taxpayers have complained that the scale of fees is unclear or even hidden, while questions have been raised about how some agents secure agreements from clients.

The consultation suggests different ways to better protect the public from unscrupulous practices and ensure they get the money they are owed, while asking different questions to better understand the problem.

This includes seeking opinions on:

• limiting the use of assignments where contracts legally transfer the right to payment from a taxpayer to an agent
• introducing measures designed to ensure that taxpayers see essential information about a paying agent service before entering into a contractual agreement
• a requirement for paying agents to register with HMRC

HMRC is aware of a number of specific concerns in the industry, including excessive commissions charged for routine tax payments. However, taxpayers can claim directly through HMRC’s free online service on GOV.UK and keep 100% of the payout themselves.

There is also strong evidence that many taxpayers do not understand the terms they are signing and feel misled, some even believing they are dealing directly with HMRC rather than a third party.

Other concerns include the submission of high volumes or speculative claims where no payment is due, which delays genuine claims, and the use of transfers, which means that payment goes to the Paying Agent instead of the taxpayer.

Jonathan Atto, HMRC’s director general of client strategy and tax design, said:

“We want to make sure that taxpayers get their full tax claims – putting 100% of the money they’re owed in their pockets – and won’t be gobbled up by the unscrupulous practices of some disbursing agents.”

“Raising standards in tax advice consultation aims to seek views so that we can better understand and address issues to help raise standards in the tax advice market. We urge all those affected to respond to the consultation and share their experiences.”

HMRC is interested in hearing from all tax agents, particularly those who specialize in helping taxpayers claim refunds; taxpayers who have claimed or are considering claiming tax refunds through paying agents; those who have seen advertisements from settlement agents; charitable organisations; user groups; and accounting professional organizations.

The consultation is now open and will run until 14 September 2022.

HMRC also reminds taxpayers that they remain responsible for their own taxes. If they do appoint an agent, they should take care to ensure they are aware of the fees and terms and conditions of the service and not share their HMRC login details with them. HMRC publishes standards for agents and will take action against agents who breach them.