Basic information about the UK tax system, the role of the Budget and the annual Finance Bill, key statistics on UK taxes, and sources of useful advice
This information should not be relied upon as legal or professional advice. Read the disclaimer.
What are tax repayment agents?
Tax repayment agents (or tax refund companies) specialise in getting customers tax repayments (also called ‘refunds’ or ‘rebates’) from HMRC.
There has been an increasing concern surrounding the activity and practices of some repayment agents. Repayment agents are an unregulated profession, and they do not have to be members of any specific professional body. There is no system run by HMRC to approve or certify repayment agents.
How do tax repayment agents operate?
Tax repayment agents claim tax reliefs on behalf of customers for most types of personal taxes.
Repayment agents can only claim reliefs on behalf of an individual taxpayer once a formal agreement has been established. Agents will usually request the authority to receive money from successful claims on behalf of the taxpayer. After the agent collects their fee, they will transfer the remainder to the taxpayer. Agreements of this kind are either nominations or assignments.
Taxpayers can ‘nominate’ a repayment agent to receive rebates on their behalf. HMRC lists common characteristics for nominations:
- They are not legally binding
- They can be rescinded unilaterally by the taxpayer
- They only cover the specific rebate the taxpayer or agent have applied for
- They do not transfer the legal ownership of the repayment to the agent
- Taxpayers can create these nominations by filling standard forms (such as form R38 for income tax refunds) or by writing HMRC a letter
Taxpayers can also authorise agents to receive rebates on their behalf via a ‘deed of assignment’, or ‘assignment’. As explained by HMRC, assignments:
- Are legally binding, and can only be ended by an agreement of the taxpayer and the agent
- Transfer the legal ownership of repayment money to the repayment agent
- Do not have a standard format to follow. Broadly worded assignments can cover any successful rebates from up to four previous tax years
Where can someone find a tax repayment agent?
HMRC said there has been a growth in tax repayment agents advertising their services online and on social media. Often, these advertisements inform taxpayers that they may be eligible for tax rebates.
Are there risks with using tax repayment agents?
Potentially. However, many repayment agents operate transparently and in good faith.
HMRC notes there has been an increase of repayment agents operating in misleading, and in certain cases, fraudulent ways. Analysis undertaken by HMRC, the Low Incomes Tax Reform Group (LITRG), and Money Saving Expert has shown a growing number of people expressing dissatisfaction with the service provided by repayment agents. Often, the agents’ lack of transparency meant taxpayers only received a fraction of what they were owed by HMRC.
Common issues included:
- A lack of awareness that a customer was dealing with a third party rather than HMRC
- A lack of information provided by agents on their procedures and what they were asking from a taxpayer
- A lack of transparency over the fee structure of repayment companies, which sometimes led to fees as high as 50% of any repayment owed
- People officially engaging a repayment agent by filling an online form, when they thought they were only expressing interest
- People being unaware that they were agreeing to a deed of assignment
What is HMRC doing to protect taxpayers?
HMRC and the Government have taken action to protect taxpayers since the level of complaints against repayment agents increased.
- The Government legislated that assignments are no longer valid for repayments of Income Tax. Agents seeking to claim income tax repayments have to use nominations instead
- HMRC has created an online form for taxpayers to complain about the services provided by tax repayment agents
- HMRC has updated its Standard for Agents guidance, introducing new requirements around transparency. HMRC expects all agents to follow this standard, and can take action against agents who breach it.
- HMRC has required all repayment agents involved in income tax or Pay As You Earn (PAYE) rebate claims to be registered with HMRC as of 2 August 2023.
What steps can be taken to be protected from poor agent practice?
The LITRG has compiled useful guidance for taxpayers who may want to engage a repayment agent. The guidance lists common concerns arisen about repayment agents in the past, which can help people notice whether similar patterns are being followed. The LITRG also signposts to different sources of support for people who feel they have been subject to unfair practice.
Although assignments for income tax repayments are no longer allowed, taxpayers should exercise caution: if agent practices are not transparent, they may not be aware that they are agreeing to a nomination, meaning their repayment is going to be transferred to the agent instead of them.
Can taxpayers claim tax repayments without using an agent?
Yes. Taxpayers can claim any repayment on their tax, for free, from the HMRC website, which has a dedicated webpage showing taxpayers how to claim tax refunds.
About the author: Francesco Masala is a researcher in the Business and Transport Section of the House of Commons Library. He specialises in taxation policy.
The Commons Library does not intend the information in this article to address the specific circumstances of any particular individual. We have published it to support the work of MPs. You should not rely upon it as legal or professional advice, or as a substitute for it. We do not accept any liability whatsoever for any errors, omissions or misstatements contained herein. You should consult a suitably qualified professional if you require specific advice or information. Read our briefing for information about sources of legal advice and help.
How National Insurance numbers are issued and what to do if someone does not have one or can’t find it.