Do you think you're due a tax refund?

If you do your own tax returns, there's always a possibility that you could have overpaid tax. It takes an expert to work out the ins and outs of HMRC's requirements.

Do you remember the endless PPI calls? Now there are tax refund companies who are operating a similar service. That means you may get a call (or two) promising to get you any refunds you are due - in return for a percentage of any refund made.

These companies do exist and, like the PPI companies, can actually get you money back - if it's due. However, the commission is usually high - generally around 40-50% of the actual refund. That's your decision to make and you may work on the premise that 60% of something you hadn't realised you had, is better than not having it at all!

If you have an accountant - they will do this for you, without charging any commission, it's part of their service.

Before you sign up

If you decide to use the tax refund company's services they will ask you to sign a 'Deed of Assignment'. This is the contract that gives them the authority to act on your behalf with HMRC.

We all know that it's tedious to read all the small print that these T&C-type contracts contain - and most people just accept the service person's explanation of what they get and sign on the dotted line. However, you could be signing away more than you think.

Tax refunds can be applied for up to four years in arrears, so, while the tax refund company may initially be talking about the last tax year's refund, they can actually claim refunds from previous years - and also claim their commission on these too.

It's all down to the wording in the Deed of Assignment, so do read it carefully before you sign anything. Typically you'll be looking for wording that says something like:

'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.'

The other thing to consider is the expiry date of the Deed of Agreement. If it's not clear, this means that the tax refund company can continue to claim refunds on your behalf - and they will probably charge you a further fee to have the Deed of Agreement cancelled.

In fact, applying to HMRC for tax refunds is actually reasonably straightforward to do yourself. The challenge for most people is knowing that they've overpaid and how to work that out.

Our advice is that, If you're considering one of these companies, you should probably have an accountant who will do this for you without additional fees.