YOUR £6m victory over tax rebate sharks charging rip-off fees

Money Mail has helped win back £6 million for taxpayers after exposing the devious tactics used by rip-off rebate firms.

These unregulated agents, which charge eye-watering fees for tax refunds that customers can claim for free, snare around 500,000 people every year. In June, HM Revenue & Customs (HMRC) finally pledged a clampdown and launched a consultation aimed at stamping out unscrupulous behaviour. To aid with its investigation, we called on readers to step forward and share their experiences.

Your response was overwhelming. Over the summer we were inundated with emails and letters outlining the underhand ways you had been preyed on by these firms. We submitted two dossiers to the taxman, and ran a series of articles naming and shaming the worst offenders.

In some cases the fees charged were more than the tax refund owed, while others had been repeatedly threatened with court action after refusing to continue with their claim.

Scores of readers also said they had no idea they were even entering into a contract that gave rebate firms permission to act on their behalf.

Now, in the first step to outlawing shady tactics, the taxman has pledged to refund 60,000 people who lost huge chunks of their cash in fees to one rebate firm highlighted by Money Mail — Tax Credits Ltd.

Angela MacDonald, HMRC’s deputy chief executive and second permanent secretary, says: ‘We are taking action here to make sure Tax Credits Ltd’s clients receive the money they are entitled to. I’d like to thank the Daily Mail for highlighting these cases and helping ensure people get their money back.’

The unprecedented intervention comes after HMRC uncovered major failings in the online processes used by the company to sign up customers. Tax Credits Ltd offers to help people claim rebates, such as the marriage tax allowance and working from home relief.

The third party company operates online, flooding social media sites with enticing advertisements claiming housholds could be entitled to hundreds of pounds.

For a rebate firm to make a claim on someone’s behalf, taxpayers must sign an iron-clad contract known as a ‘deed of assignment’.

This instructs HMRC to send any money owed to the company rather than the individual, and can be revoked only if the firm agrees. But Tax Credits Ltd customers were not shown a copy of this agreement during the sign-up process.

Instead, those who completed the online form were merely told to provide an e-signature and tick a box.

The firm claimed that doing so gave it permission to sign a deed of assignment on the taxpayer’s behalf. This meant customers were often completely unaware of the terms they were agreeing to — including the fact the firm would pocket a 48 pc fee equivalent to almost half the payout. Many did not realise they were entering into a contract at all.

HMRC said it would now repay a total of £6 million to Tax Credits Ltd customers — an average of £100 each.

Exact refunds will depend on the size of the payment claimed, and how much was pocketed by the firm in fees.

Taxpayers who have already received their refunds, minus fees, do not need to do anything.

HMRC is writing to those affected, with any charges deducted due to be refunded by mid-November.

The taxman said it is seeking to recover this cash from Tax Credits Ltd. Anyone who had their claim paused during HMRC’s investigation, which began in May, will receive their refunds by the same deadline.

Mother-of-two Gillian Archer was thrilled to discover she will get her full payment.

The 61-year-old, who works in administration at her local community hospital in Kent, had never heard of Tax Credits Ltd until she received a letter from HMRC in May stating it had paid a £607 personal tax refund to the firm.

She does not remember signing an agreement for the company to claim on her behalf. And when Gillian asked to see a copy of the contract, she did not recognise the signature provided.

When she then discovered she would lose almost half of her cash in fees, she refused to send proof of identification to the company — and never received a penny as a result.

Now, after chasing HMRC for months, she is relieved the ordeal is over. ‘I couldn’t believe the news when I heard it. It’s wonderful,’ she says.

However, critics say HMRC has not gone far enough. Currently, refunds will be paid only to online customers. HMRC says it still recognises paper forms as a valid contract, which means Tax Credits Ltd can continue to act on customers’ behalf. And the taxman stopped short of preventing the company from operating altogether.

Solicitor and former HMRC lawyer Osita Mba says: ‘HMRC should not treat victims differently based on whether they used a sign-up process that involved a paper form or an online form. It should take enforcement action by way of criminal investigation.’

There are also scores of complaints about other rebate firms using unfair and unclear contracts.

The number of people complaining to the taxman specifically about deeds of assignment has more than tripled in two years from 545 in 2020 to 1,808 in 2022, according to a freedom of information request by BBC Radio 4’s Money Box.

HMRC says there is no evidence as yet of similar problems with other firms. However, it adds that a new task force has been set up to review the sign-up procedures of all 200 repayment agents.

It also intends to publish the findings of its consultation within the next ten weeks.

Victoria Todd, head of the Low Incomes Tax Reform Group, says: ‘We urge HMRC to keep this issue as a priority and review all repayment agents’ practices, not just in relation to assignments, but other areas of consumer protection.

‘Where agents fall short, HMRC should use all existing powers open to them to take immediate action to protect taxpayers.’

Tax Credits Ltd did not respond to requests for comment.

t.armstrong@dailymail.co.uk