According to HMRC’s own statistics, 1 in 3 taxpayers overpay tax, with an estimated £322 million remaining unclaimed every year. Yet, few people bother to check if they overpaid tax in the first place, and the majority of tax payers do not seek the expert help of a tax agent to claim their money back.
Ok, taxpayers themselves can try and sort it out directly with HMRC. But apart from the fact that claiming a tax refund can sometimes become a complicated process in itself, it is not always ‘free’ as one would think. People who choose to go it alone must be prepared to invest time, energy and money in phone calls and correspondence with HMRC, with no certainty that their claim will be successful. Or they can enlist the help and expertise of a reputable tax refund company.
Tax refund companies are private firms who specialise in obtaining from HMRC the amount of overpaid income tax their clients may have overpaid. This is commonly known as a tax rebate or tax refund... Traditionally, tax refund companies lodge the claim with HMRC, chase it up and obtain the refund in exchange of a small commission fee. This is to cover their own expenses like staff costs, telephone calls, admin work, as well as the time spent chasing the claim with HMRC. It is now an industry standard that a fee is only applied once the refund is actually received (unlike accountants who will charge an upfront fee for the same service). Most companies will also operate a ‘No refund, No fee’ policy, which means that you won’t be charged for the claim if you are not due a refund. The fee is usually a percentage of the refund value itself. It is also often paired with a ‘minimum fee’ or ‘administration fee’, which is a chargeable flat amount in case the actual refund is under a certain amount. Generally, you only get charged one type of fee, and whichever is the highest.
Most companies will target the internet to advertise their services as it is a very competitive industry. But beware, not all of them are honest or trustworthy… So which type of company should you avoid? Here are a few ‘’tell tale’’ signs…
Tax refund companies have to be registered with HMRC as ‘agent’. This means they can communicate with HMRC and enquire regarding their clients’ tax position. However, they should not advertise themselves as being ‘’endorsed’’ or ‘’affiliated’’ or ‘’recognised’’ by HMRC or the UK government, or even infer that they are. The reason is that HMRC does not endorse private companies as a rule. A disclaimer should clearly be displayed on a tax refund company’s website informing visitors of that fact. If there is no disclaimer, just give them a wide berth as they are in clear breach of the law… and who wants to trust their money with a company displaying poor ethics…?
Some companies claim that they belong to some sort of ‘alliance’ or ‘professional body’, in an attempt to convince the public that they abide by a particular code of conduct. The truth is that HMRC does not endorse or recognise any of these self-professed watchdogs. Again, do not be fooled as this is just another ‘marketing’ tool…
Websites should include precise and easy-to-understand information about the actual fees and services on offer – if the information regarding what they charge is missing or unclear, make sure you query it first before you go any further. Better be safe than sorry at a later date…
The ‘average claim value’ is another common ‘fib’. Many providers advertise their average claim value is over, say, £1,000, which sounds impressive at first read. i.e.‘’Our average claim value is £1,600’’. In reality, the ‘average claim value’ is very likely to be unverified or sometimes just fabricated. It should by no means be interpreted as an indication of how much your own claim is likely to be worth. It is simply a ‘marketing’ trick designed to attract gullible would-be claimants. In fact, no-one can say for certain if you are eligible for a tax refund – let alone estimate any refund value - without first examining any documentation that you would need to provide i.e. Employment history; P45; P60; etc… Everyone’s situation being different, your claim can therefore only be judged on its own merit. As the saying goes, if a statement or an offer sounds too good to be true, then it probably is.
Shopping around for a tax refund company is often a “one day” idea, the kind of thing which gets delayed and forgotten until it’s too late. Under HMRC’s current guidelines, tax refunds can only be claimed for the previous four tax years, so it actually pays not to delay a claim as your entitlement to a refund reduces as time passes. The four-year rule means that you can currently claim any tax that you’ve overpaid going back as far as April 6, 2009. But from 6th April 2014, you will only be able to claim back as far as April 6, 2010. This means that if you did overpay tax prior to April 2010, you will not be able to claim it back as it would go over the four-year rule.
By taking advantage of a reputable tax agent’s expertise, you can really make the most of your hard-earned cash and save considerable amounts of time in the process. This in itself is worth paying a small commission for out of a refund that probably wouldn’t have received in the first place without the help of an agent. Choose a reliable tax refund firm to represent you but shop around stay away from the cowboys... Trust your instincts, and ask questions before giving over the authority to deal with your personal tax affairs to anyone.