Question to the HM Treasury:

To ask the Chancellor of the Exchequer, for what reason HMRC has issued personal tax refunds to third party companies rather than the individuals owed; and whether HMRC is taking steps to resolve that matter.

Individuals can claim tax repayments from HMRC and HMRC will refund them directly. However, HMRC will issue a tax repayment to a third party when a taxpayer has either nominated or assigned the repayment to them.

Companies which specialize in claiming tax refunds often use assignments as part of the sign-up process, which means the repayment then legally belongs to that agent. When a taxpayer signs an assignment, HMRC is obliged to make payment directly to the repayment agent. Individual taxpayers are entitled to withdraw a nomination unilaterally, but agreement is needed from both parties to revoke an assignment.

The Government is aware that some taxpayers are unaware that an assignment will be used, or may not understand what it means in practice. HMRC launched the “Raising standards in tax advice: protecting customers claiming tax repayments” consultation on 22 June 2022, which can be found here: https://www.gov.uk/government/consultations/raising-standards-in-tax-advice-protecting-customers-claiming-tax-repayments.

One proposed measure the consultation seeks views on is restricting the use of assignments for tax repayments.

The consultation is running for 12 weeks and will close on 14 September 2022. Any decision resulting from the consultation will be announced at a future fiscal event.