HMRC are calling for clients of Tax Credits Ltd who made paper form applications for tax assignments from 1 January to 26 October 2022 to contact them. This follows a successful ongoing Account Forfeiture Order on the bank accounts of Tax Credits Ltd and prior to the distribution of its assets to the state.
Up to 60,000 clients of Tax Credits Ltd may have been due a refund directly from HMRC if they had tried to reclaim tax payments through an online claim process introduced by the company in December 2021. HMRC had already begun direct refunds to some clients but have issued an update on the position, following ongoing legal action.
The latest news is aimed at clients who had made paper form applications for tax assignments from 1 January to 26 October 2022 and follows HMRC's successful application to the court to forfeit the money held in the account of Tax Credits Ltd in December 2023.
Before the Account Forfeiture Order is enforced with the balance of the company's account being forfeited to the state, HMRC are inviting clients to claim their refund. Once assessed, appropriate claims will be paid to clients by court order.
Background
In December 2021 Tax Credits Ltd set up a new online 'fast track' process for submitting and claiming tax refunds with up to 60,000 clients registered. Typically, taxpayers using a repayment agent agree to what is known as an 'assignment', which makes the agent legally entitled to the tax repayment, with the agent then paying their client the agreed portion.
Following an investigation by HMRC, Tax Credits' documentation and process "did not lead to a valid assignment of repayments" and there was insufficient "evidence of the client’s intention to assign ownership of their refund to Tax Credits Ltd".
Ultimately this meant that assignments created by the online process were invalid and HMRC should not have paid tax refund monies to Tax Credits Ltd.
HMRC stopped processing Tax Credits Ltd claims in May 2022 while an investigation continued and for those with online accounts, tax payments came directly from HMRC. In December 2022, HMRC applied for an Account Freezing Order under the Proceeds of Crime Act 2002 and by February 2023, HMRC closed the company down.
While repayments have been made to taxpayers who used the flawed online process since November 2022, this has not been the case for some claimants using the paper form process.
Originally HMRC said that those clients using paper forms had followed a legitimate process and their repayments would continue through Tax Credits Ltd but by February 2023, HMRC began direct payments because of flaws in the process.
The latest announcement says HMRC will be writing to all clients of Tax Credits Ltd, who made a claim for repayment using a sign-up process that involved a paper form from 1 January to 26 October 2022, to invite them to claim their refund.
HMRC say that taxpayers can continue to use repayment agents and many are happy with the service they receive. However, they warn that a large number of taxpayers have complained about the process of assignment and they are currently analysing the responses to the consultation 'Raising standards in the tax advice market: Consultation response' in June 2022.
Useful guides on this topic
Raising standards in the tax advice market: Consultation response
HMRC have published a response to their consultation ‘Raising standards in the tax advice market – strengthening the regulatory framework and improving registration’. This outlines potential approaches to strengthen the current regulatory system and tackle non-compliance in the tax advice market, including mandatory membership of a recognised professional body.
External link
Information for customers of Tax Credits Ltd – refunding tax reclaims
Raising standards in tax advice: Protecting customers claiming tax repayments
Press release: Tax agency stopped from operating by HMRC
