Taxpayers targeted by third party rebate agents who trap them in legal agreements… and then take a big cut of their cash
- Deeds of assignment hand over the legal right to your money to a third party
- Customers complain they have lost over half of their rebates to agents
- In some instances they never see any of the money they are owed
- HMRC is set to launch a consultation looking at raising standards for tax advisers
- This will cover repayment agents who charge high fees
Taxpayers are reporting being tricked out of thousands of pounds by companies, which claim to collect tax rebates on their behalf via unauthorised ‘deeds of assignment’.
Customers say these rebate collection companies are able to trap them in legal agreements they never intended to sign, all because they clicked a box online.
Signing an assignment means that rights to repayment then legally belong to the agent, and any pay-outs will be sent in the agent’s name to the agent’s address.
It is then up to the agent to issue whatever refund is due to the taxpayer after they have taken their fees.
Do it yourself: HMRC advises customers to apply for rebates themselves via its website, to avoid getting trapped by agency companies and risking high fees
This is the potentially the case even if a rebate is automatic, leaving them with a revenue stream despite doing no additional work for the taxpayer.
As the assignment is a contract between two parties it can only be revoked if both agree, leaving taxpayers unable to contact HM Revenue & Customs (HMRC) to have rebate cheques sent directly to them.
One victim, who wanted to be anonymous, told This is Money she was owed more than £2,000 in a rebate from the government, but a deed of assignment has been created without her permission which will send the money to the third party company.
‘I called HMRC and they said a deed of assignment has been created. There is a signature on the form, which isn’t mine, but because of that it can’t be removed from my account,’ she said.
‘When I filled in the enquiry form for a work from home rebate I didn’t know I was entering a contract.’
She has tried to contact the company asking them to remove the assignment but is yet to hear back. After researching the problem she has joined an online group of more than 50 people with similar stories.
‘It’s horrible,’ says Meredith McCammond, technical officer at The Low Income Tax Reform Group. ‘We have spoken to HMRC about deeds of assignment for a number of years. It’s not just a case of people not reading the paperwork properly, it’s something trickier than that.
‘People seem to be doing something very fleeting like clicking an ad, filling in an enquiry form, or using a rebate calculator and it appears that ticking a terms and conditions box is used by the refund agent to create a deed of assignment and connect a signature to the document.’
This year HMRC is set to launch a consultation on raising standards of tax advice in response to concerns raised by customers and stakeholders.
How do deeds of assignment trap taxpayers?
An assignment means that a rebate legally belongs to the agent, and will be sent in the agent’s name to their address
As a legal contract between two parties both have to agree to it being withdrawn and customers must contact the agent company to get it revoked
Once an assignment is on file all subsequent rebates will be sent to the agent regardless of how they were granted
HMRC recommends customers claim rebates themselves online via Gov.uk to avoid being caught out
Repayment agents who charge high fees for claiming refunds for taxpayers will come under the scope of the consultation, which will be open soon for submissions.
The department is expected to update its existing Standard for Agents later this year. In March it published the conclusions of an internal review of its existing powers to uphold agent standards.
In the meantime it advises all taxpayers to make claims themselves online at Gov.uk and avoid the use of agents.
‘The whole thing is very murky and we think it is incumbent on HMRC to get to the bottom of what tax refund companies are doing and what their process is,’ adds McCammond.
Consumer review website Trustpilot is awash with dismal reviews of rebate organisations, and victims claiming to have lost money.
Some say they never received any money from their rebate, while others claim that while they did receive some of the payment they were owed, they did not knowingly sign an agreement with the company.
A taxpayer says they lost nearly half of their rebate to a reclaim agency, adding there is a Facebook group for those affected
One customer is concerned that they will never get their money back from the company and says HMRC is unable to remove the agent from their account
Another unhappy customer says they have reported the company to Action Fraud as all their tax refunds are now being sent to the agent
The Low Income Tax Reform Group wants HMRC to take a proactive approach to cases where the taxpayer claims they did not approve a deed of assignment being created, for example by putting in place an internal process where cases are escalated faster when a query about an assignment is raised.
Alternatively, it suggested HMRC get in touch with taxpayers when an application for an assignment is made, to ensure it is genuine.
A spokesman for HMRC said: ‘Where a customer has used a repayment agent and has an assignment in place, we take steps to ensure its validity and will investigate when we suspect a customer’s signature is not genuine.
‘When HMRC receives allegations about an agent’s behaviour, we will consider whether it is appropriate to pause repayments to that agent whilst we investigate further.’
The spokesman added that contacting every person who signed an assignment would not be ‘feasible or proportionate’, as it would require a vast amount of resources.
Have you been affected by tax rebate agents? Get in touch: [email protected]