These firms help people claim tax refunds from HMRC in return for a cut of the money. The refunds can be for income tax or claiming tax breaks such as the marriage allowance. The repayment agent market is currently unregulated.

HMRC will introduce legislation to change the way repayment agents are paid for their services and better protect customers from what it described as  “unscrupulous tactics” used by some operators. 

This means stopping the use of legally binding “assignments” as part of claiming an income tax repayment, which could only be canceled if the agent and taxpayer both agreed to do so. 

This can be challenging for taxpayers who become dissatisfied with their agent, or who simply wish to take over managing their own claim.

Under new arrangements, if a taxpayer chooses to use a repayment agent to reclaim overpaid tax and wants it sent to the agent, they will need to make a nomination, which they can cancel at any time. The new process will make it easier for taxpayers to stay in control of their repayments.

Transparency for taxpayers

HMRC has set out updated standards for agents and a new HMRC registration process for repayment agents. It said these measures will make the agent sector more transparent so taxpayers better understand what they are signing up to

Victoria Atkins, financial secretary to the Treasury, said: “For too long taxpayers have been left in the dark as a result of misleading and opaque agreements with repayments agents. These new measures will ensure those who are entitled to claim a tax repayment or relief can do so freely and easily – whether they choose to do this themselves or by using an agent. 

Victoria Todd, head of the Low Incomes Tax Reform Group, said: “We welcome these additional steps, which show HMRC recognises the important role they play in consumer protection. 

“Refund companies have a legitimate role in the tax system, but the practices of some of these companies in recent years have been unacceptable. The proposed changes will hopefully address problems around the use of assignments, increase transparency for taxpayers and set clearer standards for these companies’ behavior. 

“Alongside this, it is important that more effort goes into raising awareness of refunds and ensuring it is as simple as possible for taxpayers to access them. We look forward to working with HMRC on the details of the proposals.”

These changes form part of the government’s commitment to tackle problems in the repayment agent market, which is currently an unregulated sector.

HMRC has updated its ‘standard for agents’ and they now need to provide greater evidence of customer consent, and adhere to stricter transparency rules, including introducing a 14-day ‘cooling off’ period for customers after signing an agreement.

If you think you might be owed a tax rebate, you can claim directly from HMRC via the free and secure service on GOV.UK where you will receive 100% of the money owed.