Tax refund companies, or tax refund organisations, are businesses that specialise in offering services to help you submit a tax repayment claim. They charge for these services. Tax refund organisations often operate online.
Websites for tax refund organisations often use headlines to catch your attention, for example, suggesting that you might be due a large amount of money from HMRC and that they can make claiming a refund easy for you. Some organisations also indicate that they are ‘HMRC approved agents’.
Often, it is straightforward to make a claim for a tax repayment, and you can make the claim yourself at little or no cost.
Most tax refund organisations charge a minimum fee and this can reduce or eliminate the benefit of making a claim for a tax repayment, depending on the amount of tax involved.
You should be careful of using a refund organisation to make a claim for a tax repayment for various reasons:
The costs charged by refund organisations vary, but often the charge is the higher of:
This means that the charge may outweigh your repayment if it is only small.
Tax refund organisations are not HMRC approved agents. They may be registered with HMRC for Money Laundering purposes and be registered with HMRC as an agent for the purposes of acting on your behalf. But this does not mean that the organisation has received any formal approval from HMRC.
You may be asked to sign a form 64-8 authority. This gives HMRC the authority to correspond with the tax refund organisation about your tax affairs. You may find that you have to keep using the services of the tax refund organisation year after year, if you do not take steps to remove the authority after you have used the organisation’s services.
Tax refund organisations normally request authority to receive the repayment on your behalf. They will then deduct their fee and pass the balance to you, perhaps by direct transfer to your own bank account. This creates risks, for example that you might not receive your repayment at all, and that you are sharing your own bank details with the organisation, potentially exposing you to personal fraud.
Tax refund organisations may not be unscrupulous or do anything wrong. In addition, you might prefer to employ a qualified tax adviser and pay a fee to them for helping you claim a refund, particularly if you do not understand or have time to do the paperwork yourself, for example.
But as noted above, many refunds are straightforward to claim and we would recommend that you at least try to understand your taxes for yourself even if you do decide to get an agent’s help.
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