Freedom of Information Team
S1715
6 Floor
Anthony Mil s
Central Mail Unit
Newcastle Upon Tyne
By email:
NE98 1ZZ
xxxxxxxxxxxxxxxxxxxxxxx@xxxxxxxxxxxxxx.xxx
Email xxx.xxxxxxx@xxxx.xxx.xx
Web
www.gov.uk
Date: 29 March 2023
Our ref:
FOI2023/13779
Dear Anthony Mil s
Freedom of Information Act 2000 (FOIA)
Thank you for your request, which was received on 28 February, for the following
information:
“I understand HMRC agreed to pay the customers of Tax Credits Limited £6mil ion in
settlement of fees.
It's highly irregular for HMRC to cover this sort of cost as it would usually be covered by the
professional indemnity insurance of the tax agent after a protracted legal dispute.
I also know that HMRC wasn't dealing with assignments correctly as per it's own guidelines.
I'd like to know if this settlement came as a result of a legal challenge to HMRC.
I would also like to know the details of any internal assessment the HMRC's legal
department carried out on their liability here.
If no such assessment was carried out I'd like to know why as this was a lot of taxpayer's
money to spend supporting a business where the directors and owners could possibly have
been legally culpable.”
Our response
Section 18(1) of the Commissioners for Revenue and Customs Act 2005 (CRCA) states
HMRC officials may not disclose information which is held in connection with a function of
HM Revenue and Customs. This provision ensures that the information we hold in relation to
our functions is released only in controlled and limited circumstances. Section 18(2) lists
some of those circumstances and any disclosure outside of this wil most likely be unlawful.
The CRCA recognises the interaction of other legislation such as the Data Protection Act
and the Freedom of Information Act and resolves this by having explicit instructions for both.
For FOIA
, section23(1) of the CRCA states:
(1) Revenue and customs information relating to a person, the disclosure of which is
prohibited by section 18(1), is exempt information by virtue of section 44(1)(a) of the
If you need extra support, for example if you have a disability, a mental health condition, or
do not speak English/Wels
h, go to www.gov.uk and search for ‘get help from HMRC’.
Text Relay service prefix number – 18001
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Freedom of Information Act 2000 (c. 36) (prohibitions on disclosure) if its
disclosure—
(a) would specify the identity of the person to whom the information relates, or
(b) would enable the identity of such a person to be deduced.
CRCA explanatory note 110 states the term "person" includes both natural and legal
persons, so, for example, entities such as companies, trusts and charities.
Your request seeks information relating to the tax affairs of a specific entity. If disclosing
such information would identify the entity concerned, it is exempt from release under
section
44(1)(a) of the FOIA.
If, as in this case, even just confirming whether we hold the information could say something
about an identifiable person, section 44(2) of the FOIA removes the obligati
on at section
1(1)(a) of the FOIA to either confirm or deny whether we hold that information.
Section 44(2) is an absolute exemption which means there is no public interest
consideration. This demonstrates that, while recognising that the public interest wil generally
be best served by openness, there is an overriding public interest in deferring to any existing
statutory prohibitions against disclosure.
If you are not satisfied with our decision to refuse your request under section 44(2) of the
FOIA, you may request a review within 40 working days of receiving this letter by emailing
xxx.xxxxxx@xxxx.xxx.xx or by writing to our address at the top.
If you are not content with the outcome of an internal review you c
an complain to the
Information Commissioner’s Office.
Outside of the FOIA
Although we cannot answer your request under the FOIA, we can provide some related
information on a discretionary basis.
Taxpayers can use repayment agents to make claims for repayments of tax rather than
claiming from HMRC directly. Prior to 15 March 2023, taxpayers using a repayment agent
usually agreed what is known as an assignment, which made the agent legally entitled to
receive the tax repayment from HMRC. The agent would then pay their client (the taxpayer)
an agreed portion and retain the rest as a fee for their services. Legislation introduced in the
Spring Finance Bil 2023 means that assignments of income tax repayments received on or
after 15 March 2023 have no legal effect.
Tax Credits Ltd introduced a new online sign-up process for their clients in December 2021
and following an investigation, HMRC was not satisfied that the new process and
documentation led to a valid assignment of tax repayments to Tax Credits Ltd. There was
insufficient evidence within the process of the client’s intention to assign ownership of their
refund to Tax Credits Ltd, including clients not being shown the documentation or being
specifically asked to sign the page.
If the assignment of a tax repayment to an agent is not valid, taxpayers are eligible for the
tax reclaimed so long as HMRC determines that the relief being claimed is due. HMRC
therefore decided to pay any tax refunds due for Tax Credit Ltd.’s online claims directly to
affected clients, which we estimated to be worth approximately £6 mil ion. This ensured that
HMRC was fulfil ing its core function of the collection and management of tax revenue (as
set out under the CRCA), by putting taxpayers in the correct tax position.
For more information on the action HMRC took in the Tax Credits Ltd case, please see our
policy paper published on GOV.UK.
Yours sincerely,
HM Revenue and Customs
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