UK taxpayers warned over high charges from rebate claims firms

Taxpayers are being warned to beware of online agents that offer to help them claim rebates from HMRC, then pocket up to half of any payments.

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Photograph: Radharc Images/Alamy

Claims firms appear to be taking advantage of tax relief payments owed to millions of people who were forced to work from home during the pandemic.

Some of the websites suggest applicants could receive hundreds of pounds in government rebates if they submit a claim via the agent. However, people may be unwittingly signing over the rights to up to 50% of any refunds due to them from the last tax year, plus any backdated claims for the previous four years.

A tax rebate is a repayment of overpaid tax by HMRC. HMRC automatically identifies any anomalies in tax payments between June and November after the tax year ends and sends affected taxpayers a P800 form that asks them to check their records. HMRC has an online calculator to help work out what they should have paid.

Claims for tax credits for working from home or uniforms can be made direct via HMRC’s online portal and backdated by up to four years.

In some cases, the taxpayer is not aware they signed a deed

LITRG’s Joanne Walker

The Low Incomes Tax Reform Group (LITRG) is urging the government to crack down on traders who exploit unwitting claimants.

“For many years now we have received queries from the public affected by unscrupulous companies, some of whom were misled into thinking they were dealing with HMRC,” said Joanne Walker, an LITRG technical officer. “Recently we have seen an increasing number of people who have signed a deed or letter assigning all their tax refunds to the company – which then deducts its fee even though it has not done any work to claim the money. In some cases, the taxpayer is not aware they signed a deed.”

Andrea Jackson received a letter from HMRC last month advising her that she was due a refund of £973 for the tax year 2019-20. However, the letter stated that the payment would made to a company called Tax Returned. “When I telephoned HMRC, they informed me they had acted upon my letter of authority instructions,” she said. “I cannot recall giving anyone authority.”

Jackson later received her money minus £327, which Tax Returned had deducted in fees. She discovered that she had signed a deed of assignment in June 2020, which stated in small print that it unconditionally allowed the company to receive all rebates payable for the previous four tax years.

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A tax rebate is a repayment of overpaid tax by HMRC. Photograph: Yon Marsh/Alamy

Tax Returned’s homepage boasts that claimants can apply online in three minutes by clicking a claim button and that it secured a refund of £8,614 for one applicant. The fees of 28% plus VAT and the requirement to sign a deed of assignment are mentioned on a separate webpage.

The company receives five stars from 83% of reviewers on Trustpilot but Guardian Money found that many of those reviewers had been sent targeted invitations as soon as they had filled out a claim.

Tax Returned did not respond to a request for a comment.

Trustpilot confirmed that it had issued a warning to the company last year after evidence suggested it was “cherrypicking” reviews. It told Guardian Money that Tax Returned had since stopped inviting selected customers for feedback.

A lack of regulation means that anyone can set up a tax refund firm, and while there are many qualified businesses that provide tailored tax advice, others are merely a web presence run from a PO Box address. The company names tend to be variations on the words tax rebates or tax refunds so that they appear at the top of a Google search, and some generate positive reviews by incentivising customers to post feedback as soon as they have completed the application form. One firm promised a charitable donation for every review.

The websites typically offer a free estimate and advertise eye-catching sums allegedly won for previous customers. Visitors are then encouraged to make an online claim by submitting details they can send for free via the HMRC portal. In the sites tested by Guardian Money, the hefty fees and onerous contract terms were only visible after clicking through to the terms and conditions.

Customers who want an agent to claim a specific rebate on their behalf can submit a letter to HMRC directing them to make a one-off payment to the company. Some claims firms, however, ask customers to sign a legally binding deed of assignment, which entitles the agent to receive any rebates due for the past four tax years, even those that the customer has claimed without the firm’s help. The deed cannot be revoked without the company’s agreement.

The percentage pricing structure used by claims firms is an incentive for agents to inflate tax claims

According to LITRG, some customers who made a past PPI claim through a third party have found their signature and national insurance number transposed on to a deed so that a company can cash in on any pending tax refunds. Others report submitting what they thought was an inquiry form and finding they had been signed up to an irrevocable contract.

Not only does the claimant forfeit a chunk of their payments, they could face large penalties. The percentage pricing structure used by claims firms is an incentive for agents to inflate tax claims. If HMRC discovers foul play, it is the taxpayer, not the agent, who is held liable.

LITRG says it has urged HMRC to check that deeds of assignments meet its own guidance before accepting them. The guidance includes the requirement that the wording and scope of the assignment must be clearly stated above the signature box.

HMRC told the Guardian Money it takes “firm action” against companies that breach the law. A spokesperson said: “We recognise some customers feel they’ve been misled by tax refund companies. We have listened to customers and stakeholders and we will be running a consultation this year on tackling the high costs of claiming tax refunds through some of these companies. We encourage customers to come to HMRC directly to make their claims. It takes only a few minutes to complete the online application, and eligible claims receive 100% of their entitlement.”

HMRC ‘leglly obliged’ to pay rebate firm

When Heather Russell chased a £1,330 rebate promised by HMRC she discovered the cheque had been sent to a company called Tax Credits Ltd. HMRC explained that it was legally required to pay the firm because of a deed of assignment in her name. Tax Credits notified her that it would remit the sum, minus a 48% service fee, provided she send copies of ID and her bank details. Russell’s husband, Alan, says that she applied for the rebate herself and has no memory of engaging the company.

“She was advised by Trading Standards not to send personal documents to this company, so she hasn’t received any of it,” he said. “Tax Credits has since told her that she reached its website via a Google or Facebook search and signed up on 16 April last year but the form they say she signed is dated 6 April. I wrote to their registered address asking for evidence but my letter was returned with a ‘not known at this address’ message.”

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HMRC told the Guardian it takes ‘firm action’ against companies that breach the law. Photograph: Kirsty O’Connor/PA

Guardian Money asked Tax Credits for a copy of the contract. It provided a signed application form headed “Tax Rebate Application” and addressed to HMRC. Small print at the bottom says that the signatory “unconditionally” assigns the tax repayment to Tax Credits at its registered Cardiff address, which is in the same building as the Welsh division of HMRC.

There is no company name or logo at the top of the form, which looks, at first glance, as though it is an official tax document. Many of the customers who have denounced the firm on Trustpilot say they had thought they were dealing with HMRC.

Asked about the discrepancy in dates, a spokesperson stated: “The system had simply printed a date on the form of 6 April.”

The firm did not comment on why its paperwork does not have a company header and claimed that its registered address is still valid. When questioned about the unanimously negative online reviews, it stated that it does not contact happy customers to leave feedback.

“Any potential claimants that engage though our website are sent paperwork to sign before we begin,” a spokesperson said. “This paperwork clearly details that repayments are issued at 52p in the pound.”