HM Revenue and Customs is cracking down on tax refund firms that charge customers exorbitant fees to make claims that shouldn’t cost a penny.
The companies advertise heavily online and target taxpayers looking to claim a tax refund for benefits such as marriage allowance or working-from-home tax relief.
If you’ve paid too much tax, you can claim a refund from HMRC and they’ll make the claim directly to you, free of charge.
But over the past decade, a new breed of tax refund companies have sprung up, acting like unnecessary middlemen making the claim on your behalf – and charging up to 50% commission for the privilege.
The Telegraph’s Katie Morley this month won back a £4,500 reader he owed a company after he inadvertently waived his right to a full refund.
Charities TaxAid and Tax Help for Older People say they have seen a huge increase in the number of vulnerable people targeted in the past few months alone. Often people use a tax refund company without even realizing it, said Gillian Banks, head of advice at the two charities.
“These are often low-income seniors who may have responded to an ad online and entered their details without knowing that the company would then make a claim,” she said. “The first time they know about this is when they get a letter from HMRC telling them that a tax refund is being sent to the refund company.”
Ms Banks said reimbursement companies would sometimes forge signatures on contracts. She said she had spoken to victims who had lost hundreds or even thousands of pounds after making a claim without knowing it.
HMRC has now launched a consultation, inviting taxpayers, charities and tax officials to suggest how to better protect consumers.
One of the proposals being discussed is that tax refund companies should be officially registered. John Hood, a tax partner of Moore Kingston Smith, says it could “deter unscrupulous agents from setting up new businesses”.
HMRC also asks how to tackle misleading adverts and unclear terms and conditions.
For Ms Banks, the most important of the measures proposed by HMRC concerns deeds of conveyance. These contracts authorize the tax refund company to act on your behalf to make the claim.
She said: ‘This means HMRC sends the money directly to the reimbursement company, not to you, the claimant. Prohibiting the use of postings could potentially be the most powerful outcome of the consultation.’
Martyn James, of consumer complaints firm Resolver, said it was “outrageous” that companies had been allowed to take advantage of vulnerable consumers for so long.
He added: “Unless the platforms that enable these scams are also attacked, these companies will continue to spread and consumers will lose out. »
If you believe you are owed a refund, you can claim this directly from HMRC free of charge. You will probably need your national insurance number, passport details, and details of any jobs you have held or benefits you have claimed.
If you have been misled into thinking you are dealing with HMRC, you can lodge a complaint with Citizens Advice.