Should I use a tax refund company?
If you are considering using a tax refund company to help submit your tax repayment claim, read this page to work out whether it is the best option for you.
What are tax refund companies?
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. Sometimes they partner with employers and unions who refer workers to their services (for a commission).
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 HM Revenue & Customs (HMRC) and that they can make claiming a refund easy for you.
Some organisations also indicate that they are ‘HMRC approved agents’, however using such a company does not mean that things will be ‘sped up’ as HMRC deal with refund processing on a first-come first-served basis.
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.
However, often, it is straightforward to make a claim for a tax repayment, and you can make the claim yourself at little or no cost.
What do I need to know about using a tax refund company?
The Low Incomes Tax Reform Group published a report voicing concerns about tax refund organisations.
Some tax refund companies are meeting a genuine need in the market and operate according to appropriate standards, but the area is unregulated and there is a huge spectrum of providers.
You should be aware of the following points when using a refund company.
The costs charged by refund organisations vary, but often the charge is the higher of:
- a minimum charge (for example, we have seen a minimum fee of £90), and
- a percentage of the tax repayment obtained (we have seen % fees of up to 40% for relatively straightforward claims).
These two things together, mean that the charge may outweigh your repayment, if it is only small.
Sometimes they will also add on charges for transferring money into a bank account, etc. which they are not always transparent about.
The pricing structure incentivises poor practice – for example, submitting inflated or fraudulent claims. We have also heard recently of a tax refund company asking HMRC to remove expenses that had been ‘coded in’ to a tax code, to generate further work for themselves.
Potentially false claims about their status
Tax refund organisations are not HMRC approved agents. They may be registered with HMRC for Anti-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 is in any way affiliated to or approved by HMRC.
Data protection – possible concerns
You may be asked to sign a form 64-8 authority, or give some other form of authority (such as a refund deed of assignment). The 64-8 gives HMRC the authority to correspond with the tax refund organisation about your tax affairs. A refund deed of assignment means that your refund will be paid to the tax refund organisation in the first instance, so they can take their fee (more on this below).
As a result of signing authorities like this, you may find that you keep using and paying for 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.
Receiving your refund
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. You might wish to use a tax refund company and pay a fee to them to help you claim a refund, particularly if you do not understand or have time to do the paperwork yourself, for example. That is fine, provided you have made an informed choice to do so and understand what you are getting for your money.
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. You may even be able to make your claim quickly and easily online these days, via your HMRC Personal Tax Account, as highlighted throughout this section.
For more information on the Personal Tax Account, see our page on digital services.
If you think you are due a tax repayment, but you are not able to make the claim by yourself, we suggest that you seek assistance from HMRC or from a tax adviser.
You can find a Chartered Tax Adviser using the tool on the Chartered Institute of Taxation website. If you cannot afford to use a Chartered Tax Adviser, then one of the tax charities should be able to help you.
You can contact HMRC using the details available on the GOV.UK website.
If you are considering using a tax refund agent to help you with your Construction Industry Scheme tax return and repayment, please read our guidance first.
If you are a migrant worker who has now left the UK and are considering using a tax refund agent because they can pay your refund to you in your home currency, please be aware that there are usually hefty extra charges for this and/or they may offer you a poor exchange rate. For more information on how you can obtain your refund if you have left the UK, see our migrants section.