Skip to main content

Tax refund companies who make refund claims on your behalf are at the centre of a warning by HMRC.

HM Revenue and Customs this month launched a campaign to raise awareness of the ‘tax experts’. They have warned that many charge a commission, even if you’re not entitled to a refund.

We delve deeper to explain what tax refund companies are. We also explain how to spot them and why you can claim refunds without them.

What are tax refund companies?

Many people are contacted by businesses offering to help people who might be due a tax refund from HMRC. They offer to help claim refunds on a variety of taxes. For example, claiming marriage allowance and those who have spent money on tax deductible expenses.

Such companies are legitimately run and will contact any taxpayer. While they are not illegal, the biggest issue is that their commission is high. And they will also take commission even if you are not eligible for refunds. 

A HMRC press release says, “Handing over your personal information could mean you end up having to pay back the full amount of any invalid claim made on your behalf, including any commission an agent has already taken. If it sounds too good to be true, it probably is.”

HMRC has also warned some scammers pretend to be HMRC offering tax refunds to extract details from business owners. So, check out our earlier blog on how to spot a fake HMRC email.

Do I need a tax refund firm?

You can make claims directly to HMRC without charge. People who don’t understand tax, however, might find that daunting. And business owners are often so busy, they don’t have time to make claims. In such cases, speak to an accountant.

Should you wish to make the claim yourself, then the Low Incomes Tax Reform Group has a simple step-by-step guide to making claims.

How do tax refund companies work?

Companies that offer tax refund services usually operate online and tend to advertise on social media. They say they’re HMRC approved, but that just means they are a registered agent, like an accountant.

These companies ask people to complete a short questionnaire and then they decide if the individual is owed money. They usually offer to do that for free to give you a low-risk hook. The tax refund company will then make a charge for its help.

Charges

Each company charges different amounts – but HMRC has warned that some charge up to 48% plus VAT for simple claims! They usually charge an admin fee as well as a percentage of the refund.

Sometimes charges are also added, such as for admin for transferring money into a person’s bank account. In the end, the fees end up outweighing the amount of the refund.

What should I do?

If you think you’re entitled to a tax refund, then speak to an accountant. You can contact our team if you need help with your tax affairs and tax planning.

Leave a Reply