One of the greatest criticisms of the British taxation system is its unnecessary complexity. Nowhere is this better illustrated than with the tax relief claims process. Try claiming a refund, and you’ll soon discover how difficult the process can be. It’s no surprise therefore that increasing numbers of taxpayers are looking for expert advice and turning to specialist tax relief refund agents for help.
Unfortunately many of these specialist refund agencies are charging a premium for their services, and this had inevitably led to calls from accountancy and tax bodies for HM Revenue and Customs to simplify the tax relief regime.
So why are accountants asking HMRC to take action? Well, it’s simply down to cost. Evidence shows that some taxpayers are being charged up to 40p in every pound repaid by their refund agents, and accountancy bodies believe the problem will only escalate as the complexities of the UK tax system will inevitably lead to greater demand for refunds from higher earners who are entitled to claim tax relief on pension contributions and Gift Aid donations; as well as those who have underpaid benefits such as tax credits.
What’s the position now? Well, anyone who believes they are eligible for tax relief can apply directly# to HMRC for refunds dating back up to four years. However, tax bodies have warned that the process, which is both complex and long-winded, is putting individuals off claiming what they are owed themselves, and forcing them towards employing the services of an ever- growing number of ‘no-tax-rebate no-fee’ practitioners.
The Low Incomes Tax Reform Group believes the HMRC website is at fault. Meredith McCammond, technical officer at the group, believes the website is failing to direct potential claimants to the relevant forms and tax relief guidance:
“It puts people off having a bash themselves, and so they turn to companies they think have an inside track with the Revenue,” said McCammond.
Her concerns are shared by the Institute of Chartered Accountants in England and Wales. Anita Monteith, technical director at the ICAEW has said it is “a great shame” that so many potential claimants aren’t confident enough in liaising directly with HMRC:
“People will perhaps not be aware when they are being taken for a ride,” Ms Monteith said.
She added that high-volume tax rebate claim specialists have invested more time and money in advertising their services of late, resulting in a new wave of momentum for these firms in the last three years.
The Institute of Chartered Accountants in England and Wales has warned people about using the services of tax rebate firms as they offer poor value for money. Chas Roy-Chowdhury, head of tax at the ACCA, believes people “need to think twice” before engaging a tax rebate firm to claim reliefs on their behalf, and has described many of the services as “money for old rope”.
HM Revenues & Customs has responded to the concerns, and claimed it offers “comprehensive information and guidance” on claiming tax refunds. A spokesperson for the Revenue said:
“HMRC recognises that a number of our customers may use the services of a tax refund agent but they should check very carefully about any fees they may be charged, if they employ someone to act for them.”
“Customers who apply directly to HMRC for a tax refund can be assured that if one is due, it will be paid to them in full.”