Have you been affected by Tax Credits Ltd?

What is the problem with TCL cases?

TCL offered taxpayers an option to use an online ‘fast track’ process to submit their refund claim. This involved giving an electronic signature and ticking a box.

By ticking this box, TCL says it gave them permission to sign a deed or letter of assignment on the taxpayer’s behalf. The taxpayer did not ever see a copy of this assignment before it was submitted to HMRC. You can read more about deeds or letters of assignment in our main guidance.

If you assign a repayment by a valid deed or letter, the person you have assigned it to becomes legally entitled to the refund. The valid deed or letter is legally binding and HMRC has no option but to issue a refund to the person or company to whom it has been assigned. In these cases, the assignee was TCL. However, in these cases, there was also significant doubt as to whether the assignment was valid, due to the lack of transparency in their processes.

After concerns were raised, HMRC have now looked at the processes used by TCL and decided that assignments that were created as a result of the online fast track process are NOT valid assignments and therefore HMRC should not have paid the money to TCL.

Does this apply to all TCL refunds?

The main action HMRC are taking is in relation to cases that used the online fast track process which we understand was introduced around December 2021. HMRC are writing directly to those who are affected.

If you signed a paper claim form, HMRC say that the assignment is valid, and no further action will be taken by them, although see the February 2023 update below. This is because there is a wet signature underneath the “I unconditionally assign” wording. We appreciate some people may not have realised what was meant by this wording but if you did, in fact, sign the form (albeit inadvertently), your only option is to seek independent legal advice about any other avenues of recourse there might be.

If you are not sure whether your refund claim was via the paper route or the online fast track, you will need contact either TCL or HMRC.

I claimed a refund via TCL but have not received it?

HMRC say they stopped processing TCL claims in May 2022 while they investigated the processes used. If you used TCL a while ago but have not heard anything since, it is possible that your claim is one of those held by HMRC.

HMRC, say that they will now start processing all those pending claims:

• If you signed a paper claim form and assignment – HMRC will pay your refund to TCL, and you should receive your payment from them after they have deducted their fee, although see February 2023 update below. 
• If you used the online fast track process – HMRC will pay 100% of the refund to you directly

HMRC expect these pending claims to be dealt with by the end of November 2022. You should only contact HMRC if you have not heard anything after that date.

I signed a paper claim form. I want the remnants of my refund from TCL but don’t want to give them any personal data?

We are aware that TCL’s refunds are only forwarded to the taxpayer on the production of sensitive information, like bank details. Naturally many taxpayers are reluctant to provide their bank details, so in some cases the tax refund company keeps the entire refund.

Although businesses should verify people’s identity before they provide any services as part of their anti-money laundering obligations, bank details should not be part of this. Bank details are also not required for a cheque to be issued to your home address; however this option may not be made clear. You can therefore request to receive your refund by cheque, rather than into your bank account.

I have already had some of my fast-track refund via TCL – what does HMRC’s announcement mean for me?

If you used the online fast track process from around December 2021, then HMRC will be writing to you and will pay you the full amount of your refund directly. This is because they have decided that the deed was invalid. In some cases, where HMRC have wrongfully paid the refund to TCL and you have also received the remnants of your refund from TCL, this means HMRC will have paid out the money twice.

Our understanding is that HMRC will be attempting to recover the wrongful payment from TCL. If this happens, TCL may ask you to repay the money you received directly from them, so it may be a good idea to keep some of the money aside in case that happens.

Example

Jason applied through TCL using the online fast track process. HMRC paid Jason’s refund of £200 to TCL. TCL deducted a fee of £96 and paid Jason £104 in February 2022.

HMRC will now send Jason the full £200 refund which means Jason will have received £304 instead of the £200 tax refund due.

HMRC will attempt to recover the wrongfully paid amount of £200 from TCL. TCL may ask Jason to repay the £104 to them. (See below for further information on the TCL fee element.)

If you receive any letter from TCL about repaying them, and do not wish to do this, you will need to seek legal/consumer advice because it relates to the contract you signed with TCL.  

I applied for a refund with TCL but haven’t heard from HMRC. What should I do?

HMRC are writing directly to those affected and expect refunds to be paid by the end of November 2022. If you used the fast-track process and have not been contacted by HMRC by that date, you should contact HMRC.

I am worried that TCL will pursue me for their 42% fee, even though HMRC say the assignment is invalid.

As HMRC will be seeking to recover the full amount of the refund from TCL, it is possible that TCL may try and recover the full amount of the refund from you (including their fee). This is a possibility if TCL think that they provided you with their service in good faith and that the terms and conditions as to their service were clear and fair (and therefore enforceable). If they were to take legal action, a court would have to be persuaded of this.

If you are contacted with a request for fees, don’t panic. We recommend that you take some advice from the Consumer Helpline as to whether they can legally pursue you for the money they say is owed. As this is a legal/contractual issue and not a tax issue, it is not something we nor HMRC can provide any information on.

I received a refund from a different company – can I get a refund from HMRC?

HMRC say that they have identified that assignments used by TCL through the online fast track process are invalid and therefore they should not have accepted them. HMRC, say they have not found any similar problems in other refund processes, though it is possible they have missed something.

If you think you have been affected by a process like TCL’s online fast track process, you can use HMRC’s online form to report a repayment agent to HMRC. Please note that HMRC will not contact you about the information you provide about the tax refund company. They will use the information to carry out a risk assessment of the tax refund company. You may want to keep a note of the date and time you submitted the form. 

If you have asked the tax refund company to remove the assignment, but they have refused (this should be your first port of call), then you may additionally wish to do the following:

1. Ask HMRC for a copy of the deed or letter of assignment and check if the document or signature is familiar.
2. Make a Subject Access Request to the tax refund company concerned to understand more about the process by which the deed or letter of assignment with your signature on it, came into existence.
3. Tell the tax refund company of your grievance and if you have not claimed your remaining refund from them, ask the tax refund company to confirm that your funds are being held in some kind of client account, pending any action that you might wish to take.
4. Ask HMRC to remove any ‘64-8’ (this form notes the tax refund company as your agent) from your record. Note you can get an agent removed from your record without their agreement, however being noted on your record as your tax agent is different to them having a right of assignment over your tax refunds.
5. Check if HMRC are the tax refund company’s anti-money laundering supervisor. They are required to have anti-money laundering systems and controls in place to meet the UK anti-money laundering legal requirements. If businesses fail to meet their obligations under these rules, penalties and criminal sanctions can be imposed on them and HMRC should be informed. To find out more about this and how to contact HMRC, please see the guidance (produced by the CIOT and ATT) here and here.

If you are not satisfied with HMRC’s response, you may wish to consider the following action:

1. Make a formal complaint to HMRC. You should set out in full your experience and explain why you consider the assignment to be invalid (if that is the case). There is no right or wrong way of setting things out – just saying things naturally, and letting the facts speak for themselves can be very powerful. This should allow HMRC to gather as full a picture as possible as to the situation and enable them to make any necessary interventions. You should refer to HMRC’s own guidance on what makes an assignment valid and identify which parts of the guidance have not been followed in your case (if any). For instance, HMRC’s guidance says the ‘assignment must be in writing and signed by the individual entitled to the repayment’. If your signature was applied to the assignment by the tax refund company without your authority, you had no intention to otherwise sign such a document and you did not see the completed document before it was sent to HMRC, then there is an argument it was not given by you. When writing a complaint, it is always helpful to state clearly what you want HMRC to do in response. 
2. If you have already made a complaint to HMRC and you are not satisfied with the reply, you can escalate the complaint to the next stage (called Tier 2). If you are still unhappy with the response, you can ask the independent Adjudicator to review your case.   
3. In addition to complaining, or if you are unhappy with HMRC’s response to your complaint, you may wish to consider seeking legal advice (either individually or as a group) as to what civil remedies may be available. You can find a consumer solicitor via the Law Society website. 

February 2023 update

On 20 February, HMRC issued an update to their guidance for customers of Tax Credits Ltd and a press release. As a result of these publications we understand the following: an additional 11,000 people who signed a paper claim, who had their refunds held in HMRC’s systems while Tax Credits Ltd were investigated, will now not have their refund sent to the agent. Tax Credits Ltd can no longer trade as a tax refund company, and so practically speaking, they can no longer handle refunds. These taxpayers will receive their refund directly from HMRC. This should happen automatically – affected taxpayers should not need to contact HMRC.