Taxpayers are being warned to beware of online agents who will help them claim rebates from HMRC and then pocket up to half of all payments.
Claims firms appear to be taking advantage of tax breaks owed to millions of people who have been forced to work from home during the pandemic.
Some of the sites suggest claimants could receive hundreds of pounds in government rebates if they submit a claim through the agent. However, individuals may unknowingly assign their rights to up to 50% of any refund due to them from the most recent tax year plus any retrospective claims for the previous four years.
A tax refund is a repayment by HMRC of overpaid tax. HMRC automatically identifies anomalies in tax payments between June and November after the end of the tax year and sends affected taxpayers an email P800 form prompting her to review her records. HMRC have an online calculator to work out what they should have paid.
Applications for homework or uniform tax credits can be made directly through HMRC Online portal and retrospectively for up to four years.
the Low Income Tax Reform Group (LITRG) calls on the government to crack down on traders who exploit ignorant claimants.
“For many years we have received inquiries from the public affected by unscrupulous companies, some of whom have been misled into believing they are dealing with HMRC,” said Joanne Walker, a technical officer at LITRG. “Lately we’ve seen an increasing number of people sign a deed or letter ceding all of their tax refunds to the company – which then deducts its fee even though it hasn’t done any work to collect the money . In some cases, the taxpayer is unaware that they have signed a deed.”
Andrea Jackson received a letter from HMRC last month telling her she was entitled to a refund of £973 for the 2019-20 tax year. However, the letter stated that the payment would be made to a company called Tax Returned. “When I called HMRC they told me they had acted on my instructions in the Power of Attorney,” she said. “I don’t remember giving anyone authority.”
Jackson later received her money less £327 deducted by Tax Returned in charges. She discovered that in June 2020 she had signed a deed of assignment that stated in fine print that she unconditionally permitted the company to receive all rebates payable for the previous four tax years.
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 claimant. The fees of 28% plus VAT and the requirement to sign a deed of assignment are mentioned on a separate web page.
The company gets five stars from 83% of reviewers on Trustpilot, but Guardian Money found that many of those reviewers had received targeted invites as soon as they completed an application.
Tax Returned did not respond to a request for comment.
Trustpilot confirmed it warned the company last year after evidence suggested the reviews were “cherry picking”. It told Guardian Money that Tax Returned has since stopped asking select customers for feedback.
A lack of regulation means anyone can start a tax refund firm and while there are many qualified companies offering bespoke tax advice, others are simply a web presence operating from a PO Box address. The company names are usually variations on the words tax rebates or tax refunds, so they appear at the top of a Google search, and some generate positive reviews by encouraging customers to post feedback once they’ve completed the application form. One company promised a charitable donation for each review.
The websites usually offer a free estimate and advertise flashy sums of money allegedly won for previous customers. Visitors are then encouraged to apply online by submitting details, which can be sent free of charge via the HMRC portal. On the sites Guardian Money tested, the high fees and onerous contract terms were only visible after clicking through the terms and conditions.
Customers who would like an agent to claim a specific discount on their behalf can write to HMRC instructing them to make a one off payment to the company. However, some claims firms require clients to sign a legally binding instrument of assignment that entitles the agent to receive any discounts due for the most recent four tax years, including those claimed by the client without the firm’s assistance. The deed cannot be revoked without the consent of the company.
According to LITRG, some customers who have filed a PPI claim through a third party in the past have found their signature and social security number transferred to a deed to allow a company to benefit from pending tax refunds. Others report that they submitted what they believed to be a request form and found that they had signed an irrevocable contract.
Not only does the applicant lose part of their payments, they could also face hefty penalties. The percentage pricing structure used by claims firms provides an incentive for agents to inflate tax claims. When HMRC discovers foul play it is the taxpayer, not the agent, who is held liable.
The LITRG says it has asked HMRC to check whether the deeds of engagement meet their own guidelines before accepting them. The guide includes the requirement that the wording and scope of the order be clearly stated above the signature field.
HMRC told Guardian Money it was taking “firm action” against companies breaking the law. ONE speaker said: “We are aware that some customers feel they have been misled by tax refund companies. We have listened to customers and stakeholders and will be conducting a consultation this year to address the high cost of some of these companies seeking tax refunds. We encourage customers to contact HMRC directly to make a claim. It only takes a few minutes to complete the online application and eligible claims will receive 100% of their entitlement.”
HMRC ‘obligated by law’ to pay discounts
While pursuing a £1,330 rebate promised by HMRC, Heather Russell discovered that the check was payable to a company called Tax Credits Ltd. had been sent. HMRC stated that it had a legal obligation to pay the company by virtue of a deed of assignment in their name. Tax Credits informed her that she would transfer the amount minus a 48% processing fee provided she sent copies of her ID and bank details. Russell’s husband Alan says she applied for the rebate herself and has no recollection of hiring the company.
“She was instructed by Trading Standards not to send any personal documents to this company, so she didn’t receive any of that,” he said. “Tax Credits has since told her she got to the site via a Google or Facebook search and signed up on April 16 last year, but the form she says she signed is from April 6th. I wrote to her registered address asking for proof, but my letter was returned with the message ‘Unknown at this address’.”
Guardian Money asked Tax Credits for a copy of the contract. It provided a signed application form headed ‘Tax Rebate Application’ addressed to HMRC. The fine print below states that the signatory surrenders the tax refund “unconditionally” to Tax Credits at their registered address in Cardiff, which is in the same building as HMRC’s Welsh branch.
There is no company name or logo at the top of the form, which at first glance appears to be an official tax document. Many of the customers have quit the company trust pilot say they thought they were dealing with HMRC.
Asked about the discrepancy in the dates, a spokesman said, “The system had simply printed a date on the April 6 form.”
The company did not comment on why their records do not have a company header, claiming that their registered address is still valid. When asked about the unanimously negative online reviews, it stated that it doesn’t contact satisfied customers to leave feedback.
“All potential applicants who engage through our website will receive paperwork to sign before we begin,” a spokesman said. “This paperwork clearly shows that repayments are being issued at 52p in pounds.”