In its response to the consultation Raising standards in tax advice: protecting customers claiming tax repayments, the government has said that it plans to:
- introduce legislation to render void assignments of income tax repayments (nominations of repayments to third parties will continue);
- require repayment agents to register as agents with HMRC;
- introduce new transparency requirements for agents in the HMRC Standard for Agents – a revised version has been published with the government’s response;
- explore mandatory pre-contractual disclosure forms and strengthening checks on repayment agents;
- undertake further work to strengthen the evidence that a claim has been made with a taxpayer’s consent before processing it; and
- improve the way in which taxpayers authorise their agent.
In ICAEW REP 71/22, ICAEW supported prohibiting the use of assignments but expressed concern that the changes could completely close down the repayment agent market or effectively restrict it to higher value claims, rather than improve practices in that market and stamp out abuse.
If the repayment agent model closes down and HMRC does not promote claims by taxpayers and make it easier to claim, a significant amount of tax relief might go unclaimed. ICAEW’s Tax Faculty notes that the government response provides little in the way of reassurance that HMRC will promote the availability of reliefs and make them easier to claim.
Some of the proposed new requirements do raise possible concerns that the Tax Faculty will discuss with HMRC. These include ensuring that:
- the new transparency requirements in the HMRC Standard for Agents are satisfied by the ICAEW model engagement letters and that no new requirements would apply;
- the approach to the registration for repayment agents, which will be set out in early 2023, does not lead to additional registration requirements for existing agents; and
- that changes to the existing agent authorisation processes are introduced with care.
On that last point, HMRC has decided that it should remain possible to submit repayment claims without formal authority being in place. The response states that existing agent authorisation processes should be reviewed, and the processes need to provide greater confidence to HMRC that the taxpayer is aware of and has consented to the claim, especially where it includes a nomination to make the repayment to someone other than the taxpayer. Care is required to ensure this is delivered in an effective way.
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