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Tax refund companies in the spotlight

Some people who have used a tax refund company to get a PPI or working from home tax refund are now discovering that unconnected tax refunds are also going to the refund company, with further fees being deducted.
The Low Incomes Tax Reform Group (LITRG) is concerned that people may have signed a ‘deed of assignment’, which is where a tax repayment is legally assigned, by deed or letter, to the tax refund company. Deeds of assignment are used legitimately by tax refund companies in situations where they want to make sure they get the refund that they have helped arrange, in order that they can deduct their fee.
But rather than just ask clients to sign a deed of assignment in respect of a specific claim, some tax refund companies are getting people to sign much wider deeds of assignment covering multiple past tax years. This means the company can collect any other tax refunds due to the taxpayer (usually going back the maximum of four years). The company will then take a percentage of those other refunds as well.
LITRG are warning people to check terms and conditions carefully before they sign up with a tax refund company to ensure they fully understand what fees will be collected and what refunds any deed of assignment will cover.
For those that have already signed-up to a tax refund company, LITRG is advising people to check with HMRC whether a deed of assignment has been lodged on their record.
If a deed of assignment has been lodged, there is guidance available on LITRG’s website to help people understand whether the deed is valid and what to do. LITRG says that where a refund has been sent to a tax refund company in accordance with a deed of assignment, but there are questions over whether it is a valid deed, a formal complaint should be made to HMRC, because it may be possible to argue that it should not have been accepted by HMRC in these circumstances.
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