Which? warns tax refund companies charge up to 48% of rebates

Which? published an investigation on 14 January 2022 finding that people claiming tax rebates through third-party companies lose part of the money to fees, and that the firms involved are not regulated in the same way as claims management companies¹.

The consumer body said fees charged by tax refund companies typically range from 25% to as much as 48% of any rebate received, sometimes plus extra admin fees and VAT¹. It took an in-depth look at 14 companies and counted 208 firms with "tax reclaim", "tax refund", "tax claim" and "tax rebate" in their names on Companies House¹. Four of the companies investigated made no mention of fees on their main website page or in their FAQs section, with only the term "no win, no fee" used in some cases¹.

Which? singled out Tax Credits Ltd, which it said charges an effective fee of 48%¹. It calculated that on the maximum £1,220 backdated marriage allowance rebate for a couple, a 48% fee would come to £585.60, and said it was questionable whether that was reasonable under the Consumer Rights Act 2015, which requires a "reasonable price" for a service¹. Tax Credits Ltd told Which? that it spends significantly on marketing and providing access to the potential tax relief, that its remuneration is contingent on a repayment being secured, and that the amount it retains reflects this¹.

The investigation also examined letters sent by Rebate Gateway, which Which? said bore similarities to HMRC correspondence in fonts and teal colour, stated in bold that records indicated the recipient might be entitled to a rebate of up to £1,188, and made no mention of fees or that the firm would lodge the claim¹. The letter's website section states:

Which? said that despite being registered as a tax agent, Rebate Gateway is not an affiliate of HMRC¹. Rebate Gateway told Which? it did not agree with the points raised but was actively reviewing its marketing communications, and said it endeavours to ensure prospective clients are aware it is a private tax consultancy¹.

Which? also reported terms used by Wyndan Group:

Which? said customers typically sign a "deed of assignment" upfront granting a company permission to act on their behalf, which stays in place unless removed¹. It said it is unclear how far the Wyndan Group term would extend, noting that marriage allowance applies each tax year¹.

Why it matters for households

Which? said people are losing hundreds of pounds by using third-party companies rather than claiming directly from HMRC¹. Its survey of 4,000 people in October 2021 found one in five had been contacted directly by a tax refund company, heard of one by word of mouth or found one online, and of those contacted, two in five used it to claim a rebate¹. The term "tax rebate" gets an average of 40,500 Google searches a month¹.

Tax refund firms are not regulated and are not subject to the same rules as claims management firms, according to Which?¹. They do not need to be registered with the Financial Conduct Authority, so complaints cannot go to the Financial Ombudsman Service¹. Which? said that while a complaint can be made to HMRC, there is little it can do once a deed of assignment is signed because it is legally binding¹. HMRC told Which? it does not accredit or approve agents, takes firm action against those not complying with the law, and encourages customers to come to it to make their marriage allowance claim¹. HMRC said the online application takes only a few minutes and eligible claims receive 100% of their entitlement¹.

Which? said anyone led to believe a third-party company was an official government website can complain to the Citizens Advice Consumer Service on 0808 223 1133¹. Details of how to claim a refund when you have overpaid income tax are set out separately, along with what claims management companies do and charge.

What happens next

Rebate Gateway said it was actively reviewing its marketing communications in response to Which?'s concerns¹. No further dated steps have been reported.