I have a deep dislike of companies that charge you a premium for doing something you could easily – and much more cheaply – do for yourself. A few years ago, when millions of people were claiming PPI refunds, the web was full of companies offering to make the claim for you. These firms would take a slice of any PPI compensation you claimed. Sometimes this actually resulted in people owing these companies money – all for a claim they could easily have made themselves, for free. In the wake of PPI, a whole host of tax rebate companies have sprung up. They offer to secure you various tax refunds. In return – you guessed it – you end up paying them a fee for something you could easily have done for free.

What are tax repayment companies?

If you regularly surf the web or social media, you’ll almost certainly have seen adverts from many tax rebate companies. Some will grab your attention by claiming that the taxman might owe you a large amount of money. Occasionally, some will try and make it appear they have HMRC approval (they haven’t).

While many tax repayment agents are legitimate businesses, they make their money by taking a percentage of any tax refund they claim on your behalf. Sometimes their commission can be as high as 50% or more.

HMRC is concerned that some companies give customers a bad deal. Launching a new consultation to consider ways of protecting taxpayers from repayment agents, it said:

There is also strong evidence that many taxpayers do not understand the terms they are signing up to and feel misled, some even believing they are dealing with HMRC directly rather than a third party.

What will HMRC’s consultation do?

HMRC’s consultation is designed to help bring an end to unscrupulous practices and help people get the refunds they are entitled to. In particular, it seeks views on:

  • Restricting the use of assignments. These are contracts that legally transfer the right to a tax repayment from the taxpayer to an agent. HMRC is aware that there are concerns about how some agents secure assignments from their customers.
  • Better transparency, particularly by making sure taxpayers are given material information about a service before entering into any agreement.
  • Requiring repayment agents to register with HMRC.

You can respond to the consultation here.

Should I ever use tax repayment companies? 

Some people are short of time, or simply don’t have the inclination to deal with red tape. In these cases, it’s easy to see why it’s tempting to use a tax repayment agent.

However, reclaiming tax needn’t be complex and it needn’t cost a penny. You can claim many different tax refunds for free using HMRC’s online tool.

How THP can help you

It’s very likely that many of the people who turn to tax refund companies don’t use good accountants. At THP, our tax return services are designed to make sure you pay the correct amount of tax in the first instance. That said, if you think you may have paid too much tax, simply give your account manager a call. It’s a much better option that giving away over half of your refund to a tax refund firm that doesn’t have your financial interests at heart!

Need further advice on any of the topics being discussed? Get in touch and see how we can help.

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About Jon Pryse-Jones

Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.

An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”

Jon’s appreciation for THP extends to his fellow team members and the board.  “They really know how to run a successful business,” he says.  He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.

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