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Tax refund companies 'claiming up to half of customers' money'

·3-min read
HMRC letter
Which? found some third-party firms using similar branding and language to the HMRC, raising concerns about customer confusion. Photo: Getty Images

Brits who use third-party companies to claim tax rebates on their behalf instead of going directly to HMRC are losing out on hundreds of pounds, a new study by consumer group Which? has revealed.

Not only do these companies typically take cuts of 25% to 48% (tax rebates are free to claim via HMRC) Which? found that when additional service costs are added, customers are sometimes left with less money than the firm that processed their rebate.

To make matters worse, there is little recourse for unhappy customers. The companies are not regulated so are not subject to the same rules as claims-management companies. They do not need to be registered with the Financial Conduct Authority and consumers can not take complaints to the Financial Ombudsman Service.

“Our research shows that huge numbers of people are coming into contact with firms seeking to entice them into handing over potentially hundreds of pounds of their tax rebate in unnecessary and hard to justify fees,” said Jenny Ross, Which? money editor.

“For most people with a rebate to claim, HMRC is the best port of call. Go to its website directly to ensure you aren’t left footing any unnecessary bills.”

In a survey of over 4,000 people conducted by Which?, one in five (22%) respondents said they had been contacted by a tax refund company, heard of one by word of mouth, or come across a tax refund company online.

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The group counted a total of 208 firms with ‘tax reclaim’, ‘tax refund’, ‘tax claim’ and ‘tax rebate’ in their names on Companies House, and found ‘tax rebate’ gets 40,500 Google searches a month,

Which? found some third-party firms using similar branding and language that consumers would usually expect from HMRC.

The report looked at 14 companies that either showed up in the results or were flagged by a consumer who had a negative experience. Four out of them had no mention of the fees they charge on their main website page or in their FAQs section, but the term ‘no win, no fee’ was used in some cases.

Which? found that customers are usually asked to sign legally binding contracts giving the tax refund company permission to make a rebate claim on their behalf.

Depending on the terms, this could stay in place beyond the initial claim, allowing the company to take a share of tax rebates the customer is owed into the future, regardless of whether the collector does further work for them.

Which? is advising consumers to always try claiming a tax rebate by going directly to HMRC in the first instance as the process for making a claim online is relatively straightforward and the applicant will get 100% of their money.

It said consumers should always be wary of third-party firms that may appear prominently in online search results, no matter how legitimate they may seem.

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