HMRC has issued a policy paper ‘Information for customers of Tax Credits Ltd - refunding tax reclaims’ confirming that many taxpayers who made tax repayment claims through the repayment agent Tax Credits Ltd will now receive their refunds directly from HMRC.

The move follows a large number of complaints from taxpayers and from the Low Income Tax Reform Group (LITRG).

HMRC estimate that some 60,000 taxpayers signed up to Tax Credits Ltd and in thinking that they were signing up to making 'fast track' applications for working from home refunds found that the company had in fact added their name to a 'deed of assignment' which meant that refunds were sent directly to the company and not the taxpayer.

HMRC does not consider that these electronic deeds of assignment are valid and has decided to make payments directly to those taxpayers involved rather than via Tax Credits Ltd as an agent.

Victoria Todd, Head of LITRG, said: 

“For more than a year, LITRG has raised concerns with HMRC regarding Tax Credits Ltd (TCL), after a series of complaints to us from taxpayers. We have also raised issues relating to other refund companies and their practices. One of the issues raised was that TCL used an opaque online process to collect a taxpayer’s signature and then apply it to a legal document which purported to ‘assign’ tax refunds in their favour. LITRG has maintained all along that a document with an electronic signature attached, which a taxpayer has not seen, understood or approved, should not be accepted by HMRC as a valid assignment."

This change in HMRC practice only applies to those taxpayers using the online process after December 2021 as HMRC are happy that the company’s paper form process was valid.

This is welcome news for affected taxpayers, some of whom have been waiting for their refunds since May 2022. HMRC will automatically make payments alongside a letter explaining the refund and this will be done by mid-November at the latest.

HMRC says that evidence shows that this was a specific issue with Tax Credits Ltd’s processes and documentation, and there is no evidence of similar issues amongst other repayment agents. However, HMRC is reviewing other repayment agents to ensure similar issues are not being caused by their processes and documentation.

Useful guides on this topic

Annual expenses for employees: How to claim
The ways in which employees can claim tax relief for expenses changed on 7 May 2022. This guide explains how employees can claim tax relief for the employment expenses they incur.

External link

HMRC Policy paper: Information for customers of Tax Credits Ltd – refunding tax reclaims

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