Government response announces intention to legislate on assignments

HM Revenue & Customs will legislate to remove a taxpayer's ability to legally assign an income tax repayment, or the right to one, to a third party. The government response announcing the intention to legislate was published on 11 January 2023¹. The measure takes effect on 15 March 2023 and applies to assignments of which notice is received by HMRC on or after that date¹.

The change follows a consultation document published in June 2022, titled "Raising standards in tax advice: protecting customers claiming tax repayments", which sought views on whether the government should restrict the use of assignments. Most respondents were in favour of a legislative change¹. The measure itself arose from the call for evidence on Raising Standards in the Tax Advice Market published in March 2020, during which consumer protection groups raised concerns about repayment agents' use of assignments¹.

Under the current law, assignments are a concept of property law, governed in England and Wales by the Law of Property Act 1925 S136, in Northern Ireland by section 87 of the Judicature (Northern Ireland) Act 1978, and in Scotland by the Transmission of Moveable Property (Scotland) Act 1862¹. The legislation, to be introduced in the Spring Finance Bill 2023 with UK-wide application, does not amend property law. Instead it renders void any assignment of an income tax repayment where notice is received on or after the commencement date, meaning the repayment remains the property of the taxpayer¹.

HMRC estimates the measure will affect around 400,000 taxpayers and around 200 repayment agents¹. It says the impact on the Exchequer is expected to be negligible across the years 2023 to 2024 through 2027 to 2028, and that it does not expect to incur additional costs¹. Taxpayers who do not wish to deal with HMRC directly will still be able to use an agent to claim repayments and have the repayment made to the agent, using nominations, which are not legally binding and can be rescinded¹.

Why it matters for households

From 15 March 2023, anyone entitled to an income tax repayment who signs an assignment giving a business, accountancy firm or agent legal entitlement to that repayment will find the assignment has no legal effect, and the repayment stays theirs¹. The change applies to assignments notified to HMRC on or after that date, so earlier assignments are not covered by the commencement date as described¹. HMRC states that many taxpayers did not understand what they were signing, including that an assignment cannot be unilaterally rescinded, and that assignments allowed agents to benefit from other repayments their clients were not aware of¹. Those who claim on their own behalf receive the full repayment without the costs of instructing a repayment agent¹. The measure does not change how individuals interact with HMRC, and HMRC says customer experience with repayment agents is expected to improve¹. Further communications are to be published so that customers are aware of their options¹. The government says the measure supports its objectives to make tax fairer and simpler and to protect consumers¹.

What happens next

The legislation is to be introduced in the Spring Finance Bill 2023¹. HMRC says the measure will be kept under review through communications with affected taxpayer groups¹. Questions about the change can be directed to Christiana Daly on 03000 594708 or by email at tapstechnicalconsultation-assignment@hmrc.gov.uk¹.