A tax rebate firm has been banned by HMRC after it was found to have committed serious anti-money laundering breaches following an investigation by the tax office.
Tax Credit Ltd has been stopped from operating as a repayment agent and about 11,000 customers who had their claims stopped while Tax Credits Ltd was under investigation will now receive their tax refund directly from HMRC.
Despite it being free and simple to arrange your own tax rebate from HMRC, firms such as Tax Credit Ltd charge to do the claim for you and sometimes even imitate the official HMRC website. Tax Credit Ltd took 48% of any tax rebate due.
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The news comes comes after HMRC announced a crackdown against third-party tax rebate agents to make sure taxpayers fully understand what they are signing up for when using an agent. Tax rebate firms will now have to register with HMRC and improve their standards so the use of legally binding assignments as part of claiming an income tax repayment will also stop. Assignments legally transfer the benefit of the taxpayer's repayments to the agent - but they can only be cancelled if the agent and taxpayer both agree.
HMRC said it is often the case that the terms and conditions of these assignments are not made clear to the customer.
A spokesperson from HMRC told The Mirror it will be refunding approximately £1.7m, which would mean an average payout of around £154 for each eligible person who had their claim paused during the investigation. HMRC will contact all affected clients by the end of March to explain their refund, and it will be made automatically so customers do not need to contact HMRC.
Angela MacDonald, HMRC deputy chief executive and second permanent secretary, said: “TCL have ignored their responsibilities under the anti-money laundering measures designed to protect us all from financial crime. We will not allow a small number of bad actors to tarnish the reputation of the whole tax agent sector.
“It is crucial taxpayers understand the entitlements they can claim directly from HMRC and are properly protected from the misleading tactics used by some repayment agents. The greater protections we’re bringing in will help to stop people unwittingly losing their hard-earned money to misleading agents.”
Under the new arrangements, if a taxpayer uses a repayment agent, they will need to make a nomination, which they can cancel at any time and the stricter rules will also introduce a new 14-day cooling off period when entering into an agreement with an agent.
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