The offer looks so tempting. An online agent promises it can claim tax rebates worth hundreds of pounds to which you didn’t know you were entitled — and all with no effort on your part.
But what many people don’t realise is that they are also agreeing to hand over half of their refund and perhaps even a share of any future claims.
That’s why today, Money Mail is calling on its readers to help stamp out rip-off rebate firms that prey on thousands of unassuming taxpayers every year.
Rogue firms: Unregulated third-party companies operate online and charge hefty fees for tax refund claims that households can make themselves for free
These unregulated third-party companies operate online and charge hefty fees for tax-refund claims that households can make themselves for free.
Earlier this year, we exposed how some were pocketing almost half of customers’ payouts for anything from the marriage allowance perk to tax relief on workers’ uniforms.
Now, as the cost-of-living crisis prompts soaring numbers of people to apply for these valuable rebates, the taxman has pledged a clampdown.
But to rein in the Wild West of rebate firms once and for all, HM Revenue & Customs (HMRC) needs your help. It has launched a major consultation aimed at eliminating widespread, concerning practices.
A crucial part of this involves gathering evidence from ordinary taxpayers who have been caught out.
So Money Mail is asking readers to step forward and share their experiences.
We will then submit a dossier on your behalf before the consultation ends on September 14.
Jonathan Athow, HMRC’s director general for customer strategy and tax design, says: ‘We fully support the Daily Mail’s efforts to encourage readers to share their experiences and views on repayment agents, so we can better understand and address the issues to help protect the public.
‘We feel like we’ve been robbed’
Lynne Whittington says she feels cheated after falling foul of a rebate firm in January.
The 63-year-old had checked to see if she and her husband Kevin, 60, were eligible for a marriage allowance tax refund after seeing an advert while reading the news on her phone.
She was pleased to learn they were due a £969.33 payment. But when she later got a letter from HMRC, it said the money would be paid to Touchstone Consulting Group LTD. Five months on, she hasn’t received a penny.
Waiting: Lynne and Kevin Whittington is yet to see a penny after dealing with a claims firm, despite being due a £969.33 payment
Lynne had accidentally applied for the rebate with a company called Marriage Allowance Agency, which charges 42 per cent of any refund owed and a £100 admin fee.
It is run by Total Tax Claims Limited and Touchstone Consulting Group LTD is the agent used to process claims. Lynne says: ‘I feel stupid. We have still not received the rebate, or what is left of it.
‘I can’t believe these companies can charge exorbitant fees for getting you your own money. They are basically robbing people.’
Total Tax Claims Limited did not respond to our request for comment.
‘We want to make sure taxpayers receive their full tax claims — putting 100 per cent of the money they are due into their pockets — and not be taken in by the unscrupulous practices of some repayment agents.’
As bills soar, a flurry of reminders has emerged urging qualifying households to claim vital tax perks.
This can usually be done with little effort, but rebate firms seek to snare customers first and then charge them a percentage of any refund owed.
As many as 500,000 individuals use tax-repayment agents each year, according to HMRC.
But when asked how much taxpayer cash was diverted to these firms each year, the taxman said it did not record these figures.
It estimates there are around 200 repayment agents in operation. Many pay internet giants such as Google to appear at the top of search engine results, while others advertise heavily on social media sites, such as Facebook.
Often, they ask people to fill in an online questionnaire to determine if they are due a tax refund and request personal details such as addresses and National Insurance numbers.
Exorbitant fees: Earlier this year, we exposed how some firms were pocketing almost half of customers’ payouts for anything from marriage allowance to tax relief on workers’ uniforms
But some will use this information to submit a claim on the customer’s behalf without them even realising.
Copycat websites will go as far as to imitate the official HMRC page, even using the department’s logo or the same colour scheme. The truth only becomes clear when victims later discover some cash is missing.
Consumer expert Martyn James says: ‘Firms like Google and Facebook are facilitating all this by allowing paid adverts to take prime locations, often ahead of the official sites or with little reference to them. As long as this is allowed, people will get ripped off.’
Fees typically start at around 25 per cent, but can rise to as much as 52 per cent of any rebate recovered. Some also charge additional administration costs.
Before a claim can be made, firms require customers to sign a contract known as a ‘deed of assignment’.
This transfers the right to a repayment from a taxpayer to the agent, and instructs HMRC to send any cheques to the rebate firm rather than the individual.
‘Ridiculous 52% fee cost me £383’
Alan Jones says he has no recollection of claiming for a marriage tax allowance rebate.
So, when HMRC wrote to say it had sent a cheque for £735 to a company called Hidenda, the great-grandfather-of-two was bewildered.
Taxed: Hidenda took 52% of Alan and Freda Jones’s marriage allowance payout
He later received a cheque for £352 from the same company, which had deducted a 52 per cent fee.
Alan, 78, believes he may have filled in a questionnaire online while playing the game Candy Crush. But he had no idea that by doing so he was signing a contract.
Alan, who lives in Ashton-under-Lyne, Greater Manchester, with his wife Freda, 77, says: ‘I would never have agreed to pay such a high fee for a relatively small refund — 10 per cent would have been fine but 52 per cent is ridiculous.
These firms should certainly be regulated because I would like to present my case to some kind of ombudsman.’ Hidenda did not respond to our request for comment.
However, many customers say they did not realise they had signed a contract, believing it to be a simple questionnaire checking eligibility.
Once signed, the contract can be revoked only if the company agrees. Some may refuse or charge a fee for doing so.
These contracts can also cover up to four tax years. This means firms could take a slice of any future claim — even if unrelated to the original rebate.
Between April 2021 and March 2022, HMRC received more than 350 formal complaints explicitly referring to these contracts.
Yet unlike claims management and accountancy firms, tax-refund companies are not regulated. There is no ombudsman service for disgruntled customers.
HMRC’s consultation aims to tackle unclear terms and conditions and misleading adverts.
The taxman is also considering if it should scrutinise assignment contracts and tighten restrictions around what information is provided to customers before they enter into one.
Crackdown: HMRC has launched a major consultation aimed at eliminating widespread, unscrupulous practices and needs your help in gathering evidence
Meanwhile, to reduce delays, rebate firms may be forced to register formally with HMRC before they are allowed to submit any claims.
It hopes this will stem the tens of thousands of claims submitted where no repayment is due. Unfortunately HMRC says it will not investigate the eye-watering fees charged. It claims that although costs can be large in percentage terms, many repayments are low value and net fees are not significant.
Trapped by third-party agreements
Back in June, Money Mail’s sister title This is Money reported on a case of tax rebate agents where the victim was owed £2,000, but since applying for the rebate they have heard nothing from the third-party company.
This is Money found that agents trap customers into deeds of assignment meaning any cash sent from HMRC goes straight to the tax agents. These agreements are notoriously difficult to remove and deprive victims of the money are are owed from the tax man.
Read the full story here
But Sarah Coles, from investment platform Hargreaves Lansdown, says: ‘It’s disappointing that HMRC has decided it’s not worried about fees being charged by these firms.
‘They run the risk of mounting to major costs when there are larger rebates involved.’
Excessive charges are one of the most common complaints among our readers when it comes to rebate firms. Many need this money desperately.
Money Mail is now urging the taxman to reconsider, including the vital issue of fees within its consultation.
In March, the Financial Conduct Authority unveiled new rules restricting the amount claims-management firms can charge for mis-sold loans or pensions.
This means it can only take a cut of between 15 per cent and 30 per cent of any redress won. Capping tax-rebate tariffs in the same way could make a real difference.
If you would like us to include your experience in our dossier, please write to us at email@example.com or Money Mail, Northcliffe House, 2 Derry Street, London, W8 5TT.
Include the name of the tax rebate firm used and explain how you came across the company.
For example, were you aware you were using a third-party to make your claim or did you simply think you were filling in a questionnaire to see if you were eligible?
Please also provide details regarding what fees you paid and if these were made clear to you when you applied.
Include any correspondence, such as the contract you signed, which may be relevant.
We are also asking readers to support our calls for HMRC to include the issue of fees in its consultation.
Don’t forget to include your full name, email address and phone number so we can contact you.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.