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Tax refund company / deed of assignment warning

Published on 7 July 2020

If you have recently used a tax refund company to help claim a one-off refund, the paperwork that you signed may mean that they can continue to collect other tax refunds due to you. We have added some new guidance to our website which explains more about the issue and what can be done about it.

Image of the words tax refund and a mug of coffee
(c) Shutterstock / marekuliasz

There are many organisations out there who will offer to help you get your tax refund – but most will charge a fee. Tax refund companies sometimes charge fees of up to 40 per cent or 50 per cent of the value of the refund.

This in itself is not illegal, but the pricing structure can sometimes incentivise poor practice – e.g. putting in inflated or fraudulent claims. Not all tax refund companies do this, many offer a legitimate service for taxpayers who do not wish to claim their refund directly from HMRC and in some cases may not bother claiming at all if it wasn’t for the tax refund company. However, as HMRC have a ‘process now/check later system’, if there are any irregularities with claims, these may not come to light for several years.

It also means that often, the tax refund company will want to receive the refund first so they can be sure of getting their fees before passing the balance on to you.

There are various ways for a taxpayer to nominate someone else to receive a repayment on their behalf – for example, in a tax return, by completing a form R38 or by writing a letter.

Some taxpayers go further than just a nomination and legally ‘assign’ a repayment by deed or letter to a nominee. A deed or letter of assignment assures the nominee that the repayment will definitely be paid to them as opposed to a nomination that can be withdrawn by the taxpayer at any time.

You can read more about tax refund companies in our guidance. Our latest additions to the guidance explain:

  • The effects of signing a deed or letter of assignment
  • Things to watch out for
  • What steps you can take if you have signed a deed or letter of assignment if you no longer wish it to apply

Contact: Meredith McCammond (click here to Contact Us)
(First published: 07/07/20)

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