LITRG’s urgent warning to taxpayers about refund companies
The Low Incomes Tax Reform Group (LITRG) is warning taxpayers never to share their Government Gateway username and password details with anyone – including with companies that offer to make tax relief claims on their behalf. The warning is after LITRG learnt about taxpayers for whom seemingly inappropriate tax relief claims have been made via Self Assessment tax returns.
Such is LITRG’s concern about this issue that it has provided a list of warning signs for taxpayers. For example, LITRG says that nobody, including tax advisers, accountants or tax refund companies, need your Government Gateway credentials to undertake their work on your behalf.
According to the taxpayers involved,1 the refund company asked them to register for a Self Assessment tax return to claim employment expenses. But the company then used the individual’s Government Gateway login credentials to prepare and submit a tax return containing apparently inappropriate claims for a sophisticated tax relief: Enterprise Investment Scheme (EIS) relief.2
This generated large refunds which were sent to the refund company, with a percentage then paid over to the taxpayer. Although the taxpayers were unaware of the specific claims made on their behalf, HMRC have now contacted these individual taxpayers demanding they repay the full amount of the refund because it was incorrectly claimed.
Running a tax refund business is usually legitimate and provides a useful service for those who choose to pay someone to deal with their refund claim. But LITRG has long had concerns about certain tax refund companies for several reasons including, most recently, the use of deeds of assignment.3 The use of Government Gateway credentials represents another extremely worrying development, says LITRG.
Meredith McCammond, Technical Officer at LITRG, said:
“It is entirely legitimate for taxpayers to use tax refund companies to claim refunds on their behalf because not everyone wants to deal with claims themselves and some people would prefer to pay someone to claim on their behalf. But we warn that there are serious consequences of getting caught up with an unscrupulous tax refund company.
“In the most recent cases we are aware of, the tax refund companies did not act as authorised agents for the taxpayers involved. Instead, they asked the taxpayer for their Government Gateway username and password in order to file a tax return. Tax advisers registered with HMRC can file online tax returns on behalf of their clients using their own ‘agent’ credentials and do not need to ask for individual taxpayers’ login details.4
“We urge taxpayers not to give anyone their Government Gateway username and password.”
In addition, taxpayers should be aware of certain warning signs when signing up with tax refund companies such as:
- The tax refund company has been recommended because it gets big refunds (compared to what you might usually expect for the type of refund/circumstances)
- Those who own/run the tax refund company are not members of a professional body5
- The tax refund company does not follow basic professional practices
- Communication with the firm is only by phone or text message and/or social media
- The company wants you to set up a Self Assessment record with HMRC
- The company wants to use your own personal Government Gateway credentials to prepare and file a tax return (as if it has come from you)
- You are not given a copy of your tax return or tax calculation to approve before submission
- You do not recognise the entries or claims shown on your tax return – for example, you are claiming tax relief for an investment (or ‘subscription’) in shares when no such investment has been made
Despite the warning, LITRG is worried that more people could get caught out by this particular practice unless HMRC put extra measures in place.
Meredith McCammond said:
“HMRC already undertake security checks and on occasion will delay issuing a Self Assessment refund to a taxpayer until further checks are complete. But we think there is more HMRC can do to protect their customers. As a starting point, we think HMRC need to incorporate more specific checks into their system to stop claims with certain features6 until further evidence or proof is provided.
“It is important that HMRC develop a strategy, with consumer protection at its centre, to deal with all the different problems in the tax refund company sphere as well as more widely. This includes cases where taxpayers feel they have been misled around things like fees by agents claiming legitimate refunds on their behalf,7 right through to those who are essentially victims of scammers looking to defraud the system.”
Notes for editors
1. A number of threads can be found on the Consumer Action Group website, for example: https://www.consumeractiongroup.co.uk/topic/439034-hmrc-asking-for-rebate-back-fast-tax-rebates-ltd-scam/?tab=comments#comment-5125368
2. The Enterprise Investment Scheme (EIS) provides tax relief to investors who invest in smaller, unquoted, trading companies, for example, income tax relief is given at 30 per cent on the cost of new EIS share investments. There are a number of requirements to be met before a company can use the scheme, including that they must provide HMRC with a compliance statement: https://www.gov.uk/guidance/venture-capital-schemes-apply-for-the-enterprise-investment-scheme. The company should also provide the taxpayer with a certificate to certify that certain conditions of the scheme are satisfied: https://www.gov.uk/government/publications/enterprise-investment-scheme-income-tax-relief-hs341-self-assessment-helpsheet/hs341-enterprise-investment-scheme-income-tax-relief-2021
3. ‘LITRG concern at growing complaints about tax refund companies’: https://www.litrg.org.uk/latest-news/news/210625-press-release-litrg-concern-growing-complaints-about-tax-refund-companies
4. https://www.gov.uk/guidance/client-authorisation-an-overview – where a registered agent files a return, HMRC will know that the return has come from an agent. If someone uses the taxpayer’s own login details, then it is likely to appear to HMRC that the individual has filed their own tax return, without the involvement of an agent.
5. For example, the Association of Accounting Technicians (AAT), Association of Chartered Certified Accountants (ACCA), Association of Taxation Technicians (ATT), Chartered Institute of Taxation (CIOT), Institute of Chartered Accountants in England and Wales (ICAEW), Institute of Chartered Accountants of Scotland (ICAS) and Society of Trust and Estate Practitioners (STEP)
6. Red flags’ could be triggered by specific circumstances which could include:
- Unusual claims for relief that do not fit with the expected pattern or picture of the taxpayer
- Large and/or unverified amounts inserted to trigger either a full or substantial refund in the context of the taxpayer
- The tax return being sent in by via personal Government Gateway credentials but with a refund agent entered into the nominee box
- Lack of 64-8 or any other sign that the agent is formally acting on behalf of the taxpayer
- An agent nominee who is not recognised by HMRC for various reasons – e.g., anti-money laundering.
7. Where the individuals involved in a tax refund company are members of a professional body, a complaint can be made through the professional body’s complaint procedure. Unfortunately, there is currently no requirement for those giving tax advice to be members of a professional body and the firms that LITRG are aware do not appear to be run/owned by members of any professional body.
Contact Hamant Verma, External Relations Officer, 0207 340 2702 [email protected]