Tax rebate schemes – too good to be true?

Image your friends and colleagues told you that they’d been awarded ‘tax rebates’ worth thousands of pounds for uniform cleaning and subsistence. This is what happened to a UPS delivery driver called Dennis Lucas. He’d heard that a Suffolk-based firm called Apostle Accounting would be able to claim back tax for him. So, he got in touch and signed up. Unfortunately, Mr Lucas has since discovered that some tax rebate schemes are not only too good to be true, but also end up leaving you out of pocket.

What was the Apostle tax rebate scheme?

Apostle Accounting hit the headlines in 2023 after being featured in an episode of the BBC’s Rip Off Britain. The company was alleged to have submitted incorrect Self-Assessment repayment claims for its clients’ employment expenses. Clients reported that Apostle’s tax rebate scheme cost them 24% (20% + VAT) of the money it reclaimed from HMRC.

The only problem was that many of Apostle’s clients were then hit with bills from HMRC for erroneously claimed expenses. One of them was Lee Osborne. Apostle claimed £19,000 on his behalf, slicing off their 24% cut before paying him. Some time later, he was hit with a letter from HMRC demanding that he repay £21,235.

A police enquiry into the Apostle scandal is now in its third year. In 2024, a special operations unit undertook searches of a commercial unit and two homes in Stowmarket, along with an office in Peterborough.

Another tax rebate court case

Apostle’s tax rebate schemes are back in the news following a hearing at a first tier tribunal. The case concerned Dennis Lucas, mentioned above, who signed up for Apostle’s service. The company filed four tax returns for the years 2017 to 2020. In each, it claimed £60 for uniform cleaning, along with amounts ranging between £3,500 and £4,200 for ‘travel and subsistence’. For 2021, Apostle also filed a tax return for Mr Lucas, claiming expenses of £2,615.

In 2023, HMRC got in touch with Mr Lucas. They told him that while the £60 uniform cleaning rebates were acceptable without evidence of expenditure, the other amounts weren’t. They also asked him whether Apostle had asked him for receipts or any other evidence to support the claim. Apostle had not.

HMRC decided that the expenses were at best based on guesswork. Mr Lucas was hit with new assessments for all five tax years, meaning he faced a substantial bill. He appealed to the first tier tribunal.

The tribunal findings

The tribunal had to rule on a number of issues of law. However, it found that Mr Lucas had authorised Apostle to act on his behalf. It also concluded he had been careless in not asking for a greater clarification of how Apostle calculated his tax rebate. Apostle was found to have behaved deliberately in submitting the erroneous tax returns, meaning HMRC’s assessments for all five years were valid. Mr Lucas was thus deemed liable for the tax wrongfully claimed by Apostle, including the fee they sliced off. In other words, his involvement in the tax rebate scheme has left him very much out of pocket.

Other tax rebate scheme victims

The tribunal judge had sympathy for Mr Lucas, but pointed out that “more than 800 people are affected and are having to repay the full amounts of the tax reclaimed by Apostle”.

In short, large numbers of people who use Apostle’s tax rebate schemes face major bills. Most will not be as lucky as Julian Lowe, who won his case against HMRC because the latter had not attempted to obtain evidence of his expense expenditure.

Don’t fall victim!

If a tax rebate scheme seems too good to be true, it probably is. HMRC is currently highlighting this with a campaign designed to help people avoid being caught out by bad tax advice. If you are a THP client and you encounter a scheme you’re not sure about, please talk to your account manager. They’ll be able to advise you and offer you some proper tax planning advice.