ICAS responds to a consultation on protecting taxpayers claiming repayments
By Susan Cattell, Head of Tax Technical Policy
23 September 2022
Susan Cattell outlines the ICAS response to a consultation on protecting taxpayers claiming repayments from HMRC: ICAS believes all tax agents should be required to belong to a professional body.
The long term solution to problems with tax agents
ICAS has responded to an HMRC consultation, Raising standards in tax advice, protecting customers claiming tax repayments. This is the latest consultation to consider problems in the tax advice market. ICAS has responded to all requests for input, and will continue to work with HMRC to explain the role we undertake to maintain and promote tax regulatory and professional standards.
As noted in this consultation, many repayment agents do not belong to a professional body. ICAS believes that in the long term, the only fully effective way to protect consumers (those claiming repayments but also those using agents to deal with HMRC more generally), would be to introduce a requirement that everyone acting as a tax agent should be qualified, and should belong to one of the main professional bodies that subscribe to, and enforce Professional Conduct in Relation to Taxation. As our consultation response sets out, agents who do belong to these professional bodies are required to maintain their technical competence and to adhere to high professional standards. This precludes the types of poor behaviour that produce the problems outlined in the consultation.
Mandatory membership of a professional body could take some time to implement in full, and might require a transitional period but it is difficult to envisage any other way to ensure that all tax agents comply with minimum standards of behaviour. In the meantime, we support HMRC’s plan to expand its own ‘standard for agents’, so that it more closely matches the standards professional body members are already required to meet; HMRC should also enforce the standard rigorously by imposing sanctions on those failing to comply.
Problems with some repayment agents
The consultation notes that repayment agents can provide a useful service to taxpayers. However, it goes on to explain that HMRC has received increasing numbers of complaints about problems experienced by consumers using repayment agents to claim tax refunds on their behalf. Issues raised included:
- the use of assignments, which legally transfer the benefit of the taxpayer’s repayments to the agent
- taxpayers not being made aware of, or fully understanding the terms and conditions to which they are agreeing
- taxpayers being unaware that they are dealing with a third party and not HMRC.
HMRC has also identified large numbers of ineligible claims made by some repayment agents; these delay the processing of legitimate claims.
Proposed measures
The consultation proposes targeted actions to address the problems arising from the behaviour of some repayment agents. ICAS broadly supports the proposed measures, provided they are properly targeted and do not impose additional burdens and costs on agents who belong to the main professional bodies – who are already required to maintain high professional standards. ICAS would also support greater efforts by HMRC to encourage taxpayers to make claims themselves – and included some suggestions in the ICAS consultation response for publicity campaigns and making claiming easier.
The proposed measures in summary are:
Disclosure
Requiring the disclosure by repayment agents of fees and other material information, to consumers, possibly though a mandatory pre-contractual disclosure form.
ICAS would not support any additional burden being imposed on members of professional bodies, who would usually have in place engagement letters, setting out their terms of engagement and the basis on which fees are charged. It is difficult to see how a mandatory form could be restricted to repayment agents, given the absence of any precise definition of such agents.
it would be preferable for HMRC to expand (and enforce) its own ‘standard for agents’, so that all agents would be expected to meet the same minimum standards.
Restricting the use of assignments
Restricting or banning the use of assignments for tax repayments. The consultation asked for views on three options:
- Prohibiting the assignment of tax repayments.
- Prescribing the format of an assignment of a tax repayment, to include a clearly worded customer protection message.
- Requiring formal HMRC agreement to the assignment, for it to be valid. The consultation itself noted that this is unlikely to be practical on a large scale.
ICAS supports a prohibition on the use of assignments for tax repayments. Very few ICAS members now receive repayments on behalf of their clients. This used to be common in the pre-self-assessment era but has ceased to be the case. Clients’ money regulations govern how ICAS members must deal with any money they hold or receive on behalf of clients. Other professional bodies have similar regulations.
The use of an assignment is now only likely to be contemplated in exceptional circumstances – and in most cases the use of a nomination should be possible, rather than an assignment.
Requiring repayment agents to register with HMRC and requiring repayment agents to be authorised by clients
The introduction of:
- A requirement for all repayment agents to formally register with HMRC, before HMRC would accept any claims they submit. This would involve them providing details to HMRC about their business, such as the names of any directors, trading address, company registration number, and details of their Anti-Money Laundering Supervision (AML) registration. HMRC would check the validity of these credentials.
- A requirement for repayment agents to be formally authorised by their clients with HMRC before they can submit a claim.
ICAS supports these proposals. We cannot see any reason why repayment agents should not be obliged to register with HMRC. It is important that there should be a level playing field, with all agents having to comply with the same minimum requirements. Currently, other agents have to register with HMRC (including demonstrating that they have AML supervision) and obtain authorisation from their clients; repayment agents should be required to do the same.
Let us know your views
We welcome Members’ input on consultations or other tax-related matters – email tax@icas.com to share your insights and feedback. ICAS responds to many tax calls for evidence and consultations, as well as producing tax policy papers and reports. We also regularly attend meetings with HMRC at which service levels, delays and other issues are discussed, and we raise problems being encountered by Members.