CONTROVERSIAL tax refund firms are taking hundreds of pounds worth of HMRC rebates from households by helping to claim them, experts warn.
The unregulated firms are controversial because they take a slice of cash owed to people when they could easily claim back the tax for free.
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The fees are very high and vary massively, with one firm charging up to 40%.
In January 2023, HMRC announced results of a consultation into the market and raised concerns about repayments being made to third parties rather than the taxpayer.
It has made it harder for tax refund firms to operate which has caused a number of agents to collapse.
Some firms use tax calculators to collect personal information, which once on file can be used indefinitely to make claims.
Experts warn that people can unwittingly start a claims process when using these tools without knowing it.
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Meredith McCammond, from the Low Incomes Tax Reform Group (LITRG), said: “For a lot of people, tax is hard.
“These agents present themselves as having technical expertise, so the taxpayers feel on the backfoot, not really understanding whether what they’re being told is too good to be true.”
LITRG is seeing a rise in inflated or false claims, particularly around work expenses.
Because most agents work on a “no-win, no-fee” basis, with percentage-based fees, it incentivises poor practice, she said.
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Where an agent makes a claim, HMRC may pay it.
If they find out later it was wrong – even though the claim was submitted by and paid to an agent – it is irrelevant.
The taxpayer is still on the hook for repaying it all – including the agent’s fee.
Common invalid expense claims related to everyday commuting or lunch costs, and work clothing or equipment already supplied by the employer, according to HMRC.
How much do firms charge?
BEWARE of tax firms taking a slice of your HMRC refund.
The Sun contacted all firms for comment.
Tax Returned said any claim that taxpayers could get the same service for free directly from HMRC is “very misleading”, given its own process takes no more than a few minutes on a smartphone.
It added that its fees are solely based on the initial refund amount, even if taxpayers continue to receive HMRC allowances thanks to the claim.
This means the fee amounts to less than 10% of the ongoing tax benefit, a spokesperson said.
What should I do?
If you have paid the wrong amount, HMRC will either send you a tax calculation letter called a P800 or a Simple Assessment letter.
But only if you are employed or receive a pension. Anyone registered for self-assessment will have their tax bill adjusted automatically.
If you have not received any of these but still think you might have paid too much tax, try HMRC’s simple tool.
It should tell you if you are due a refund in around 15 minutes.
‘Check how to claim a tax refund’, asks where you think you might have paid too much tax.
It may be from paid work, job expenses, a pension or other income or your self-assessment bill.
It then walks you through a handful of questions to determine your circumstances.
For UK residents not eligible for self-assessment, R40 is the form required to submit a claim on overpaid tax on savings and investments, including PPI.
The form for Marriage Allowance, which lets those eligible transfer £1,260 – or 10% – of their Personal Allowance to a spouse or civil partner, is even simpler and should not require a third-party agent.
Both forms are available online, which is a quicker option than paper forms and post.
In most cases, you can only reclaim tax for the past four years.
You can also use the free HMRC app. This is a quicker and paper-free way to process your refund, which will be paid straight into your bank account.
Log in using your Government Gateway user ID and account password.
Access the relevant section, such as pay as you earn (PAYE). Click on ‘Summary of Income Tax’ – either for the current, or previous, tax years.
If you are eligible for a tax rebate, you’ll see a green button that says ‘Claim your refund’. Click this and follow the instructions.
An HMRC spokesperson said: “Our advice is consistently clear, people should be careful before handing over sensitive personal information and be cautious about promises of easy money – if it sounds too good to be true, it probably is.
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“Customers can always make their own claims direct with us online and keep all of what they are due.
“Anyone who does choose to use an agent to represent them can find guidance by searching ‘How to choose a tax agent’ on gov.uk.”
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