Claiming tax refunds through tax repayment agents
Find out about tax repayment agents, what they do, if you need to use one, what are the risks and what HMRC is doing about them.
Tax repayment agents (or tax refund companies) specialise in getting customers tax repayments (also called ‘refunds’ or ‘rebates’) from HM Revenue and Customs (HMRC).
There is 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 rebates on behalf of customers for most types of personal taxes.
Repayment agents can only claim rebates 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 transfer the remainder to the taxpayer. Agreements of this kind are either nominations or assignments. Assignments, unlike nominations, are legally binding, and require the consent of both parties to be rescinded.
NominationsTaxpayers can ‘nominate’ a repayment agent to receive rebates on their behalf. HMRC says that nominations:
- aren’t legally binding
- can be rescinded unilaterally by the taxpayer
- only cover the specific rebate the taxpayer or agent has applied for
- don’t transfer the legal ownership of the repayment to the agent
Taxpayers can create these nominations by filing standard forms (such as form R38 for income tax refunds) or by writing HMRC a letter.
AssignmentsTaxpayers can also authorise agents to receive rebates on their behalf via a ‘deed of assignment’, or ‘assignment’. Assignments can’t be used for income tax repayments. As explained by HMRC, assignments:
- Are legally binding, and can only end by the agreement of the taxpayer and the agent
- Transfer the legal ownership of repayment money to the repayment agent
- Don’t have to follow a standard format. Regardless of how they are worded, however, assignments cannot cover future tax years.
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 in repayment agents operating in misleading and sometimes fraudulent ways. Analysis undertaken by HMRC, the Low Incomes Tax Reform Group (LITRG), and Money Saving Expert between 2021 and 2023 showed 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 the 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
HMRC and the government have taken action to protect taxpayers:
- The government legislated that assignments received by HMRC from 15 March 2023 are no longer valid for repayments of income tax. Agents seeking to claim income tax repayments must 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 requires 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.
- In December 2023, HMRC and the Advertising Standards Agency issued an enforcement notice. The notice provides guidance to promoters of tax repayment services. Advertisers that do not comply with the notice may be subject to sanctions.
- As outlined by the government in answer to a parliamentary question in February 2024, HMRC can issue penalties, suspend claims, or refuse to deal with agents, as well as work with the police to support investigations when needed.
- From April 2025, agents will have to get an “advanced electronic signature” (a secure digital signature) from a client to receive a tax repayment on behalf of that client.
The LITRG has published useful guidance for taxpayers who may want to engage a repayment agent. The guidance lists things to look out for when using an agent. The guidance also signposts sources of support for people who feel they have been subject to unfair practice.
HMRC has launched the ‘don’t get caught out’ campaign providing guidance to taxpayers to ensure they don’t fall victim to misleading tax repayment advertisements.
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.
Taxpayers have four years from the tax year concerned to claim a refund.
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.
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