Be careful dealing with Tax Refund companies

female-financial-advisor
female-financial-advisor

Article by Phil

A warning last month in Money Marketing (7th February 2022) about issues arising from an increasing prevalence of Tax Refund companies. It seems that the number of companies offering a refund service is on the rise, perhaps due to tax complications resulting from furlough and working from home.

Two issues seem to be commonplace; one is the level of charges, and the other is in relation to legal assignments of funds.

Remember that you can deal with a tax refund claim yourself and there is lots of help on the HMRC website.

In terms of charges, tax refund companies are not regulated, Even though some may well be official HMRC registered agents, it doesn’t mean that they in any way “work with” or “represent” HMRC. Charges can therefore vary from provider to provider. Charges of 50% + VAT are common. This might be considered reasonable given that most claims are for small amounts of less than £100 each.

The second issue is with deeds of assignment. Companies are asking for these to be signed because they are concerned with no payment of invoices and want to be able to deduct their fees directly from any refunds obtained. This is not unreasonable but be careful. Some of the deeds are open ended and not time sensitive meaning that once they are signed any future refunds will be sent to the tax refund company, who can then deduct their share even though they might not be acting for you in the future.

It will be interesting to see if regulation is in the pipeline for this growing industry.

HMRC itself is also concerned and has issued a warning to the public not to be tricked into providing their Government Gateway log in details to companies, fearing that there are a number of scams doing the rounds.

 

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