How to distinguish between a genuinely trustworthy tax refund company and a firm that should stay clear of…? Choosing the right tax agent could prove tricky, especially if you’re not familiar with tax. In the first part of this article we share some of our “insider” knowledge to help you avoid being “ripped off”…
Let's first explain what "tax agent" and "tax refund company" really mean...
What do "tax agent" and "tax refund company" really mean?
In the UK, “HMRC defines an ‘agent’ as someone who is appointed to discuss, correspond or transact with them about matters they are responsible for. Agents include, for example, an accountant or a professional tax adviser (source taken from HMRC’s website).” Tax agents also include tax refund companies. Tax agents help taxpayers with a wide range of tax issues, among others submitting self assessment tax returns on their behalf, working out tax liabilities, tax planning and representation, advice on tax law, etc…
Tax refund companies normally limit their field of expertise to apply to HMRC for a tax refund on their clients’ behalf i.e. When leaving the UK; Applying for tax relief in relation to professional expenses like tools or mileage, for example. They charge a commission or “fee” for their services as they are privately owned companies not part of HMRC or the UK government.
Although nothing prevents taxpayers to undertake such tasks without hiring the services of a professional, having a tax expert on your side can prove a valid and time-saving resource. Let's use car repairs as an analogy. You can choose to do the repairs yourself if you feel you have the necessary tools and know-how, or you can use the services of a garage or a professional mechanic…
8 valuable tips to help you select a reputable tax refund company
We focus here on how to select a reputable tax agent, and in particular trustworthy tax refund (or tax rebate) companies. We are not implying that all tax refund companies are crooks (although in our experience some are just that!) or that TaxRefundPro is the only ethical company out there… Our aim is to make you aware of some “insider” facts that may not be obvious to the general public.
1. Beware of “Authorised tax agent from HMRC” claims!
Tax refund companies are not allowed to advertise themselves as being ‘’endorsed’’ or ‘’affiliated’’ or ‘’recognised’’ by HMRC or the UK government, or even infer that they are. Tax refund companies should clearly display on their website a disclaimer informing visitors to that effect. Displaying the HMRC logo in any way, shape or form is also a breach of HMRC’s regulations. HMRC does not endorse private companies as a rule and want to clamp down on any activity from unethical firms that would lead unsuspecting taxpayers to believe that they have some sort of “special” status or arrangement with the tax authorities or the government.
Any company who does not follow these strict regulations plainly breaks the law. HMRC actually encourage taxpayers to report such breaches so appropriate action is taken against unethical behaviour. If there is no disclaimer on a tax refund company’s website, or if a logo of HMRC (or an approximation of it) is displayed, just give that firm a wide berth – they know they are breaking the law. Could you trust a company with such poor ethics…?
2. Don’t believe the hype around “average claim value”
Remember the age-old saying, “if something sounds too good to be true, then it probably is”…? Well, it applies here! A tax refund company which boasts that you’re safe with them because their “average claim value” is worth X amount of pounds, is simply trying to lure you. More often than not, these numbers are fabricated or would not pass the test of scrutiny. It is simply a ‘marketing’ ploy.
The truth about tax refunds is that each case is unique; claiming that other taxpayers have received several hundreds of pounds worth of tax refunds cannot serve as a benchmark to how much you could get when using the same services. No tax agent can quote you a figure for a tax refund unless you first supply them with specific documents (like P45, P60, Employment history; etc.) and then they compare those with HMRC’s own records (which they can only do if you signed the official form “Authorising your agent (64-8)”).
The truth about tax refunds is that each client’s case is unique; claiming that other taxpayers have received several hundreds of pounds worth of tax refunds cannot serve as a benchmark to how much you could get when using the same services. No tax agent can quote you a figure for a tax refund unless you first supply them with specific documents (like P45, P60, Employment history; etc.) and then they compare those with HMRC’s own records (which they can only do if you signed the official form “Authorising your agent (64-8)”).
3. Is the cost of the service clear to you?
Most tax refund companies have their own website, which should include easy-to-find and easy-to-understand information about the actual fees and services on offer. If the information regarding what they charge is missing, unclear or difficult to locate, ask them directly for clarification before you go any further.
Look for ‘hidden’ costs or fees that may affect the value of any refund due to you. Are there any additional “fees” for administration or bank charges? Any genuine firm will be happy to provide you with this information. If they don’t, best stay away from such “agents” as they’re in breach of the Consumer Act, and a lack of transparency regarding their fees may be a strong indication that they have something to hide.
4. Shop around
Ok, so you may be clear on a particular firm’s fee structure, but this doesn’t mean that their prices are competitive. “Fees”, “rates” and “minimum fees” can vary greatly from one firm to the next. Don’t sign anything until you’ve allowed yourself some time to shop around and compare prices. Genuine companies will not resort to bullying or “sales tactics”. Compare like for like in terms of the actual services on offer. Bear in mind that price alone is not enough to form an opinion when shopping around; “cheapest” doesn’t necessarily mean “best”.
Read part 2 of this article next week when we explore the last 4 “insider" tips on how to select a reputable tax refund company.
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