Skip to content 
Tax refund companies can help claim refunds for employment expenses, but it’s important to be aware of their practices to avoid falling victim to unscrupulous companies. This article will offer an extensive manual on safeguarding oneself against unscrupulous tax refund firms and key indicators to watch out for.
Beware of Inflated Claims: It is not uncommon for tax refund companies to assert exaggerated or fictitious employment expenses, specifically those related to travel and subsistence. Therefore, comprehending the stringent regulations surrounding claiming expenses against your employment income is crucial.
Regarding work-related travel expenses, the costs of your regular commute to your usual place of work aren’t normally eligible for tax relief. When travelling to a temporary workplace instead of one’s regular place of work, tax relief on related expenses may be claimed. However, tax law’s definition of ‘temporary’ differs from its colloquial usage. The concept is intricate and elucidated in HMRC’s booklet 490, which offers numerous examples to aid in comprehending the notion of a temporary workplace.
The availability of tax relief for subsistence costs is contingent upon a ‘qualifying’ journey to a temporary workplace. If the journey doesn’t qualify, both the cost of that journey and any subsistence costs related to it won’t qualify for tax relief. Tax refund companies claiming large tax refunds for travel to a temporary workplace or subsistence should be viewed with caution.
Claims for Specialist Reliefs: Taxpayers seeking expense relief claims, specifically for uniforms, may encounter tax refund agents who request their Government Gateway log-in information and registration for Self Assessment. These agents then use the provided details to submit tax returns with illegitimate claims, including those for Enterprise Investment Scheme (EIS) relief.
Taxpayers may need to be made aware of the practices of certain tax refund companies, which may result in the company redirecting the refund to themselves through the tax return process, only providing a small portion of the refund to the taxpayers. It is important to note that taxpayers are responsible for the actions of their agents, and HMRC has the authority to request repayment of any tax refunds that were inappropriately claimed.
Referral Fees and Tax Implications: Some tax refund companies offer referral fees to encourage friends or colleagues to use their services. Be aware that these fees are taxable income and must be declared to HMRC unless exempt under the trading allowance.
Deeds (or Letters) of Assignment: Certain companies that handle tax refunds request taxpayers to assign their repayments through a deed or letter. Such assignments are a formal and binding way for taxpayers to transfer their refunds. However, following the Spring 2023 Budget announcement, assignments of income tax repayments are now considered void. This change is effective from 15 March 2023. HMRC will not accept or process any applications that contain assignments received on or after this date, as they will be deemed legally invalid.
Protect Yourself: To protect yourself from dodgy tax refund companies, consider the following tips:
- Understand the strict rules for claiming expenses against your employment income.
- Be wary of tax refund companies claiming large tax refunds for travel to a temporary workplace or subsistence.
- Do not sign a deed or letter of assignment.
- Do not give anyone your Government Gateway username and password.
- Look out for overinflated promises, and be wary of being targeted on social media.
- Check the tax refund company’s reputation, accessibility, and professional standing.
- Check online reviews and complaints.
- If the proprietor is a member of a professional body, report them to the professional body concerned.
Tax refund companies can help claim refunds, but it’s crucial to be aware of their practices to avoid falling victim to unscrupulous companies. Understanding the strict rules for claiming expenses against your employment income, avoiding deeds or letters of assignment, and being vigilant about promises and communication can help.
If you suspect that a tax refund company has engaged in poor commercial practices, levied unfair fees, or imposed unreasonable terms and conditions, it is advisable to seek legal or consumer guidance, for instance, from the Consumer Helpline. In addition, regulatory bodies like the Advertising Standards Agency, National Trading Standards, and the Information Commissioner’s Office (ICO) may be interested in your experiences with tax refund companies.
As a result of the Tax Credits Ltd situation, HMRC has created a form to report tax refund companies. This is intended to help HMRC build an evidence base and understand these companies’ actions, enabling them to take appropriate measures. If you suspect you have been scammed or defrauded, contact Action Fraud. If you need help , please contact Tax Accountant at 0800 135 7323 or email info@taxaccountant.co.uk for expert advice.