Refund companies fleece taxpayers with small printby
The Low Incomes Tax Reform Group (LITRG) is concerned that many taxpayers have been hit with further fees from tax refund companies after unwittingly signing a deed of assignment that covers multiple years.
LITRG has received an increasing number of reports from confused and alarmed taxpayers who have used tax refund companies for a specific claim, such as a PPI (payment protection insurance) or working from home tax refund. But these taxpayers are now being subjected to additional fees for unconnected tax refunds.
Deed of assignment
Many of these taxpayers without realising may have signed a wider deed of assignment, which legally assigns a tax repayment to the tax refund company.
Rather than collecting refunds for a specific claim, the wider deed of assignment enables the tax refund company to fetch any other refunds due dating back four years. These companies would then take a percentage of those refunds – which can be as high as 40% or 50% of the refund.
LITRG is concerned that the refund companies have duped potentially vulnerable taxpayers.
“In the cases reported to us recently, people either did not realise they had signed a deed of assignment at all or thought they were signing it in respect of a specific tax refund only and not for past years,” said head of LITRG Victoria Todd.
Todd explained that ‘deed’ may sound like a formal legal document, but she warned that only the inclusion of a few words on an application pack people are asked to sign will make a valid deed.
Taxpayers caught out
LITRG has urged taxpayers to read the terms and conditions before signing anything given to them by a tax refund company to ensure they’re fully clued up on what fees will be collected within their agreement and the years any deed of assignment will cover.
“Sometimes people may agree to lengthy terms and conditions, within which wording may be buried such as: ‘as part of the process of recovering overpaid tax on your refund, a full reconciliation of your tax position will be carried out. This may result in other overpayments of tax being identified and recovered, on which our fee will apply’,” said Todd.
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