HMRC is giving millions of pounds to unregulated firms that charge naive taxpayers hefty fees for simple claims that cost nothing to make.
A Money Mail investigation today reveals how the taxman is helping to fuel the cynical industry that harvests millions of pounds in rebate cash.
Taxpayers who used the third-party firms have repeatedly complained they were unaware they would lose huge sums to fees.
Lost out: Elaine and Michael Hemmings saw much of their tax refunds swallowed up in refund firms’ charges
One company is siphoning off close to half of the tax relief paid out to those who work from home.
Claims for the perk, worth up to £125 a year, have soared in the pandemic, with nearly five million people applying since March 2020.
From the marriage allowance to tax relief on uniforms, there’s a rebate company for just about everything.
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.
‘Tax rebate’ is searched on Google 40,500 times each month, according to consumer group Which?
When we entered the phrase, HM Revenue & Custom’s (HMRC) website did not top the search results.
Instead, two tax refund firms beat the real taxman because they have paid Google to appear there.
The top result, Taxrebate.co.uk, is run by Tax Credits Ltd. Its website uses a similar teal colour to HMRC’s logo.
HMRC said it did not know how much rebate cash it diverted to rebate companies
Which? money editor Jenny Ross says: ‘Copycat tactics can make it difficult for people to distinguish third-party firms from official government departments.’
Rebate firms also draw in customers with online questionnaires that determine if they are owed cash by HMRC.
The taxpayer is then asked for personal information, such as their address or National Insurance number.
Before a claim is made, the customer has to sign a contract: a ‘deed of assignment’, which instructs HMRC to send cheques for refunds to the rebate firm.
Joanne Walker, of the Low Incomes Tax Reform Group (LITRG), says: ‘For many years we have been contacted by people who are unhappy with these companies. Some don’t remember instructing the firm to make a claim and say they were only trying to find out if they were eligible for a payout.’
Martyn James, of complaints site Resolver, says: ‘HMRC is potentially sending these companies millions of pounds each year. It is outrageous that companies such as Google allow them to charge people for something that’s free without any warnings.’
Taxpayers can be left with less than half of their payouts once rebate firms take their fees. The charges, usually based on a percentage of the refund, start at around 25 per cent.
But taxrebate.co.uk, which claims to help employees claim rebates for working from home, levies a 48 per cent fee.
Money Mail found no mention of fees on the company’s homepage.
One review on Trustpilot says: ‘All they do is fill in a form with all the details you give them and for that they take 48 per cent of what you get — such a rip-off.’
Manchester retail worker Ashleigh Hesketh-Hall, 33, found out she could claim tax relief for working from home when she spotted an advert for Tax Returned Ltd on Facebook. It charges 28 per cent of the refund or £42 — whichever is greater.
Ashleigh’s refund came to £60.40, so she lost two-thirds of it to Tax Returned, which says it has claimed back £11.5 million for customers since 2014.
She says: ‘I was so angry when I ended up with hardly anything.’
Taxpayers can be left with less than half of their payouts once rebate firms take their fees. The charges, usually based on a percentage of the refund, start at around 25 per cent
Trapped by terms
Once signed, the contract can be revoked only if the company agrees. But some contracts cover up to four previous tax years.
Experts told Money Mail this meant that a rebate firm could take a slice of any future claim — even if unrelated to the original rebate.
Valerie Boggs, of charity TaxAid, says: ‘If the taxpayer makes a backdated claim with HMRC directly, the company will receive the rebate instead of the taxpayer if a contract is in place.’
Alison, 65, and Stuart Dixon, 76, signed a contract covering four previous tax years with Ensign Advisory Ltd when they tried to claim marriage allowance.
They found Marriage Allowance Check, which is run by Ensign, after clicking on a Facebook advert.
However, although HMRC informed them it had sent a cheque for £486.91 to the company in January 2021, they were still waiting to receive their money last month.
Unlike claims management and accountancy firms, tax refund companies don’t have a regulator so there is no ombudsman to complain to.
Alison, a retired accounting assistant from Bradford, says: ‘We never realised we were handing all of this control to these people.’
Ensign says the couple had failed to respond to emails and text messages asking for proof of identity.
How to claim for free
Working from home: You can claim up to £125 of income tax relief if you were told to work from home for at least one day of the tax year.
Taxpayers who complete tax returns should claim when they fill in self-assessment.
Those who do not can apply through HMRC’s online portal at gov.uk/tax-relief-for-employees/ working-at-home.
Marriage allowance: Married couples can transfer £1,260 of their personal tax-free allowance to their partner, reducing their income tax bill by up to £252 a year.
Apply online at gov.uk/ apply-marriage-allowance.
Uniform: Workers who wear uniforms can claim a rebate for maintaining it. What you receive will depend on your rate of tax and the industry in which you work.
The standard allowance is £60 a year, so a basic-rate taxpayer would get 20 pc back, or £12 in total. Apply at gov.uk/claim- tax-refund.
- You can call HMRC to discuss rebate claims on 0300 200 3300.
They have now received their £486.91 — minus £204 in fees — and the deed of assignment has been cancelled.
Michael Hemmings, 77, claims he had no idea he would have to pay such a high fee when he entered his details in to the website.
An email confirmed the company reclaimed £967.74 but as it charges 42 per cent of refunds plus £100 ‘admin fee’, the pensioner and his wife Elaine will receive only £461.29.
Michael, from Horsham, West Sussex, says: ‘HMRC should be looking into these companies before it goes ahead and sends them money.’
Labour MP Emma Hardy, who sits on the Treasury Committee, says: ‘Taking nearly half of someone’s rebate is too much, but these firms aren’t registered with the Financial Conduct Authority so there’s no one to complain to.’
Nearly half of all reviews about Ensign Advisory on Trustpilot are ‘bad’ — the worst possible rating.
The review site is littered with terrible reviews about similar tax refund firms from customers who say they did not realise fees would be so high.
Meanwhile, others don’t even remember signing up to a service and have reported companies to Action Fraud.
Taxrebate.co.uk has received only ‘bad’ ratings on Trustpilot.
‘I feel duped by this company.’ wrote one customer who did not realise Tax Credits Ltd would charge a 48 per cent fee.
And although Tax Returned has a 4.7 out of five rating on, Trustpilot warned it against ‘cherry picking’ reviews last year. This is because the company was — until then — inviting only selected customers for feedback.
All three firms say customers are presented with their fees as well as their terms and conditions and must confirm they have acknowledged them.
Tax Credit’s 2,300-word terms would take the average reader more than nine minutes to get through.
Ensign’s customers can find out about its fees by clicking on the ‘pricing’ section at the bottom of its website before they make a claim.
But the firm’s full 1,800-words terms, which customers are invited to click on before they claim, would take more than seven minutes to read.
Tax Returned claims customers are informed they can claim refunds through HMRC for free.
However, a spokesman says they could not provide screenshots of this part of the website because it was undergoing maintenance.
When Money Mail asked the taxman how much cash it diverted to rebate companies each year, it said it did not record these figures.
HMRC could only confirm that agents and accountants made 379,459 claims for clients in 2020-21 for relief on employment expenses, down from 485,075 the previous year.
Yet the LITRG says it has seen an increase in complaints since 2020, as employees rushed to claim tax relief after working from home.
And an HMRC report on the companies, published last year, found taxpayers who used them often did not know they could claim their cash back for free. HMRC says it will be consulting on the high fees charged by these firms this year.
But the LITRG’s Ms Walker believes it should go further and question deeds of authority which arrive at HMRC.
She says: ‘Most ordinary people would have no real reason to sign a deed of authority. We would like to see HMRC contacting any taxpayer who has signed one to make sure they understand what they are agreeing to.’
An HMRC spokesman says: ‘People who use tax refund agents can forget that they have signed a binding contract and that the agent acting on their behalf will take a significant cut of what they’re due.’
An Ensign spokesman says it is ‘inevitable’ that not every single customer will be ‘entirely satisfied’.
A Tax Credits spokesman disputes that its website uses the same colours as HMRC’s official website, adding: ‘We will process many hundreds of claims before an individual expresses dissatisfaction.’
A Tax Returned spokesman says its reviews are ‘100 per cent genuine’ and customers prefer to use its services rather than dealing with HMRC themselves.
Google removed the two tax return firms from its top search results after Money Mail got in touch.
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