Tax rebate companies take 48% cut of claims
Tax rebate companies usually take a 25% to 48% cut of all the claims they make according to an investigation from Which
The investigation found that third party companies that claim a tax rebate on behalf of a taxpayer usually take a cut of 25-48% of the claims made and when additional service costs are added, customers are usually left with less money than the company who processed their rebate.
According to the Consumer Rights Act 2015 customers must be charged a ‘reasonable’ amount for a service however, Which found that some companies were charging nearly half on a commission. Which states that it is ‘questionable to whether this constitutes as a reasonable amount’.
The investigation also found that customers were asked to sign contracts called ‘deeds of assignment’, which gives permission for tax refund companies to make a claim on their behalf, with some contracts also allowing the company to take a share a future rebate claims, regardless of whether the collector does further work for them.
In a survey of over 4,000 people, one in five, 22%, said that they had been contacted by a tax refund company, heard of one by word of mouth or come across one online, with the most common service being provided being help with claiming marriage allowance.
The investigation found that ‘tax rebate’ is googled 40,500 every month with Which? counting 208 businesses with ‘tax reclaim’, ‘tax refund’, ‘tax claim’ and ‘tax rebate’ in their names on Companies House.
Out of the 14 companies that showed up on Google or were flagged from a negative consumer experience, four had no mention of the fees they charge on their main website page or the FAQs section with the term ‘no win non fee’ being used in nearly half of the cases.
Jenny Ross, money editor, Which said: ‘Our research shows that huge numbers of people are coming into contact with firms seeking to entice them into handing over potentially hundreds of pounds of their tax rebate in unnecessary and hard to justify fees.’
The investigation also found that a number of the third party companies were replicating branding and language used by HMRC in its marketing, with Which? highlighting a letter sent by the company Rebate Gateway which used similar colouring, fonts, and phrases to HMRC which could lead the recipients to conclude they were contacted by the tax authority itself.
When approached by Which? Rebate Gateaway stated that they were ‘unable to agree with any of the points raised’ and that they are ‘fully aware’ of who they were and the services it offered. However, the company stated that it ‘will actively review all marketing communications that are forwarded to prospective clients’.
As these companies are not required to be registered with the Financial Conduct Authority (FCA) Which? states that consumers are unable to make complaints to the Financial Ombudsman Service (FOS) meaning that they cannot be regulated in the same way as claims-management companies.
Which urges taxpayers to contact HMRC if they are looking to claim a tax rebate.
Ross continued: ‘For most people with a rebate to claim, HMRC is the best port of call. Go to its website directly to ensure you aren’t left footing any unnecessary bills.’
An HMRC spokesperson said: ‘We don’t accredit or in any way approve agents and take firm action against any not complying with the law.
‘We encourage customers to come to us to make their marriage allowance claim. It takes only a few minutes to complete the online application and eligible claims receive 100% of their entitlement. It is important that people thinking of using a tax agent are clear in advance about fees and are satisfied they’ll get the service they sign up for.’