Ads on Facebook stating ‘get your money from the taxman’ get banned, after misleading contractors

A Facebook ad that enticed contractors with the message “Get your money from the tax man” has been banned.

It is one of three adverts by tax repayment agents to have last month fallen foul of the Advertising Standards Authority (ASA).

The ASA ruled that the sanction for all three adverts, one of which appeared on Google not Facebook, is that they cannot appear again in their current or complained-about form.

'Misleading'

The trio hit for their “misleading” advertising are Total Tax Claims Ltd (trading as Total Tax Refunds); Quickly Finance Ltd (trading as Fast Track Reclaim) and Philipson Hardwick Advisory Ltd (trading as The Tax Hero).

All three made claims about available tax refund amounts without supporting evidence, omitted “significant conditions”, and didn’t make clear that consumers could apply directly to HMRC at no cost.

A January 2023 consultation by HMRC on protecting customers claiming tax repayments acknowledged that many consumers opt for tax repayment agents for three reasons.

'Complex'

First, because people are unaware they can claim any refund due directly from HMRC; second; because they don’t want to deal directly with HMRC and third, because they fear directly claiming is “complex”.

But two of three advertisers (The Tax Hero and Fast Track Reclaim) failed to make clear in their adverts that claiming indirectly via them meant that consumers would be transferring the legal benefit of their claim to the advertiser.

Worse still amid a cost-of-living crisis, none of the three ads made clear that the agents deducted a fee from the refund -- the lowest being a still-hefty 36% (Fast Track Reclaim) and the highest being a swingeing 48% (The Tax Hero).

'Contractors who get tempted'

Carolyn Walsh formerly inspected for the tax authority and now an adviser to contractors, she’s pleased the ASA is joining her old employer in targeting tax repayment agents.

“This action by the ASA will reduce the number of taxpayers who want to make a claim…but end up signing over a substantial percentage of it to an agent in the process,” Walsh told ContractorUK.

“That‘s something which will soon be banned too, albeit with legislation.

“Contractors who get tempted before then need to factor in the added risk that the money might actually have to be repaid later, if HMRC checks the entitlement and decides an overpayment has been made. Oh, and this is after you pay up to almost half of their claim to the agent!”

'If it sounds too good to be true...'

But in an alert many contractors will be familiar with, HMRC’s director-general for customer strategy and tax design Jonathan Athow said, “if it sounds too good to be true, it probably is.”

Nevertheless, inflating anyone’s financial expectations is unethical according to the chief executive of PayePass Julia Kermode.

She was reflecting on all three adverts exaggerating the refund payable, partly because in addition to the steep percentage deductions, each agent also imposed separate “minimum” fees (such as a £30 “admin fee” with Total Tax Refunds).

'Contractors will have wrongly expected to receive more money'

“It’s right that the misleading claims of these firms are dealt with because contractors will have wrongly expected to receive more money than they were entitled to,” Kermode told ContractorUK. 

“But several years ago, the ASA ruled against some advertised claims made by a tax avoidance scheme…[yet the scheme’s] website, along with the disputed advert wording remained in place unchanged for at least six months.  

“So while we should absolutely welcome intervention against the tax repayment agents, the ASA’s track record means I’m not convinced it’ll make any difference at all.”

'Void'

The ASA said that, further to it banning the ads and advising the three companies of their advertising responsibilities in future, the government plans to introduce legislation to render “void,” assignments of income tax repayments.

A new requirement for tax repayment agents to register with HMRC will also be introduced.

The ASA reflected: “The effect of such legislation would be that assignments of income tax repayments would have no legal effect and the repayment would remain the property of the customer.”

'Clampdown is underway'

“Clearly something has to be done,” says Walsh, the ex-Revenue officer who is a director of Oblako Ltd.

“If you do a Google Search for ‘tax relief CIS,’ the top result is usually a tax repayment agent, rather than HMRC or an organisation like the Low Incomes Tax Reform Group which would give taxpayers accurate tax advice.

“So I’m glad to see a clampdown is underway. But it's taken a long while for HMRC to recognise that people who use repayment agents are not ‘up to no good’ and that these taxpayers should be protected. Perhaps soon, they finally will be.”

'Further enforcement action being considered'

ASA's director of complaints and investigations Miles Lockwood said: "Financial services like those offered by tax repayment agents can be highly complex, and it’s vital consumers understand what they’re getting into. That’s why we’re pleased that HMRC is bringing in timely legislation to tackle this issue and increase clarity and trust.  We will continue working in partnership with HMRC on this issue.

“These rulings make it clear to tax repayment agents that they need to provide transparent information about these services and avoid misleading consumers. They need to make it clear what costs are associated with their services, and whether the legal benefit is transferred from the consumer to them.

“We’re monitoring the situation, and we’re considering further enforcement action in this space in the near future.”

'Disgrace'

Chartered accountant Kevin Austin, managing director of Access Financial, told ContractorUK:  "Encouraging people to sign over their rights to receive such payments, which may be in the past and future, is a disgrace.

"The failure [by the advertisers] to mention that they will levy fees is an outrage. But you wonder why people should think there are charitable institutions out there providing this as a service gratis.

"As I keep saying to people, Caveat Emptor. If something is too good to be true, it will invariably become an expensive lie."

Austin added that if individuals believe HMRC owes them money; they ought to contact the Revenue directly and try to make a claim themselves.

"If the matter is complicated, or you are unconfident about doing this," he advises, "find yourself a proper tax accountant who is qualified and experienced to do the job. Yes, they will charge you, but they probably won't cheat you. If they do, you will have redress through their professional organisations."