‘Rip-off’ tax refund firms posing as HMRC are under scrutiny in a new proposed crackdown

Third-party rebate companies can charge up to 48% for their service – although it’s free to make a claim even through the Gov.uk website. HMRC is advising on how it can better protect customers

HMRC is set to introduce new measures to protect taxpayers from using rip-off refund agents who pocket large chunks of their tax refunds.

The action would target third-party refund companies that ask people to apply for a tax refund on their behalf.

These discount companies can charge up to 48% for their service – although it’s free to make a claim even through the Gov.uk website.

In some cases, the websites are designed with the same colors and logos as HMRC to give the impression that they are affiliated with the government.

They often appear above ads on social media sites, which customers then assume is a free tax refund opportunity.

But many taxpayers do not understand the terms they are signing and feel misled, HMRC acknowledged today.

Have you been left out of pocket by using an out of pocket claims company? Let us know: mirror.money.saving@mirror.co.uk

The Mirror have previously spoken to several people who have used tax refund companies, unaware that they are not affiliated with HMRC – or free to use.

Mum-of-two Julie Pulford, who lives in Twickenham, unknowingly used a third-party company after being advised by her employer that she might be entitled to a tax break for working from home.

You can claim a tax rebate of £6 a week, with the amount you get back based on the rate at which you pay tax.

For example, if you pay the 20% property tax rate, you’ll get £1.20 a week in tax relief – this adds up to around £60 a year.

That’s what Julie expected to get back.

“The online logo and branding had the same branding colors as HMRC and was very compelling. It was an online form and remember it was really easy,” Julie said.

“My employer said it was really easy and it was an online form, so I didn’t think anything of it.”

HMRC will now launch a 12-week consultation to look at ways to better protect taxpayers.

This includes looking at how it might restrict the use of contracts that transfer the right to a rebate from the taxpayer to the repayment firm.

HMRC will also seek opinions on how customers can get clear information about the fees associated with third party agencies and require all tax refund companies to register with HMRC.

However, the consultation preview does not say whether HMRC will consider how much third-party firms can charge customers.

Taxpayers can apply for a tax refund directly via HMRC’s free online service on GOVERNMENT.UK for free.

You will not be charged a fee or forfeit a percentage of your refunded taxes.

Sarah Coles, Senior Personal Finance Analyst at Hargreaves Lansdown, said: “Tax refund firms confuse people into paying way too much fees they don’t understand to companies they didn’t even know were using.

“ In some cases, they may end up losing a large chunk of discounts that the company had nothing to do with. HMRC has launched a consultation on how it can help protect customers.

“ This is a welcome development. At the moment people may have no idea about the costs involved until they unknowingly handed over hundreds of pounds to a reclamation company they had no idea how to use and signed up for the right to other discounts. “

Jonathan Athow, HMRC’s Director-General for Client Strategy and Tax Design, said: “We want to make sure taxpayers get their full tax due – put 100% of the money they’re due in their pockets – and don’t fall for the unscrupulous practices of some payback agencies.

“The ‘Raising the Standards in Tax Advice’ consultation aims to collect opinions so that we can better understand and address the issues in order to help raise standards in the tax advice market.

“We urge all stakeholders to participate in the consultation and share their experiences.”