HMRC is looking to introduce new measures to protect taxpayers from using rip-off repayment agents that pocket large chunks of their tax rebates.
The action would target third-party refund companies that charge people to claim a tax refund on their behalf.
These rebate firms can charge a fee of up to 48% for their service - despite it being free to put in a claim yourself via the Gov.uk website.
In some cases, the websites are designed with the same colours and logos as HMRC.
They often appear via adverts on social media websites, which customers then assume is a free way to reclaim tax.
But many taxpayers don’t understand the terms they are signing up to and feel misled, HMRC admitted today.
Have you been left out of pocket by using a claims refund company? Let us know: mirror.money.saving@mirror.co.uk
The Mirror has previously spoken to several people who have used tax rebate companies without realising they're not linked to HMRC - or free to use.
Mum-of-two Julie Pulford, who lives in Twickenham, unwittingly used a third-party company after being advised by her employer that she might be entitled to a tax rebate due to working from home.
You can claim tax relief on £6 per week, with the amount you get back based on the rate at which you pay tax.
For example, if you pay the 20% basic rate of tax you would get £1.20 per week in tax relief - this adds up to around £60 per year.
This is what Julie was expecting to get back.
“The online logo and brand was the same brand colours as HMRC and very convincing. It was an online form and remember it being really easy to do,” said Julie.
“My employer did say, it was really easy and was an online form so I didn't think anything of it.”
HMRC will now launch a 12-week consultation to consider ways to better protect taxpayers.
This includes looking at how it could restrict the use of contracts which transfer the right to a repayment from the taxpayer to the repayment firm.
HMRC will also seek views on how customers can be given clear information about the fees involved with third-party agencies, as well as requiring all tax reclaim companies to register with HMRC.
However, the consultation preview stops short of saying whether HMRC will look at how much third-party firms can charge customers.
Taxpayers can make a claim for a tax rebate directly through HMRC’s free online service on GOV.UK for free.
You won’t be charged a fee or have to give up a percentage of your reclaimed tax.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown said: “Tax rebate firms are confusing people into paying far too much in charges they don’t understand, to companies they didn’t even realise they were using.
“ In some cases, they can end up losing a major chunk of rebates that the firm had nothing to do with. HMRC has launched a consultation into how it can help protect customers.
“ This is a welcome development. Right now, people may have no idea of the costs involved until they’ve unwittingly handed over hundreds of pounds to a reclaim firm they had no idea they were using, and signed away the right to any other rebates. “
Jonathan Athow, HMRC director general for customer strategy and tax design, said: “We want to make sure taxpayers receive their full tax claims – putting 100% of the money they are due into their pockets – and not be taken in by the unscrupulous practices of some Repayment Agents.
“The ‘Raising standards in tax advice’ consultation aims to seek views so we can better understand and address the issues to help raise standards in the tax advice market.
“We’re urging anyone affected to respond to the consultation and share their experiences.”
