APPLYING for tax refunds can seem like a chore – but using "rip-off" reclaims companies could see you lose HUNDREDS of pounds.
Claims firms are legit third party companies that offer to apply for tax rebates on your behalf.
These firms offer help in exchange for a big chunk of the cash that they have won back for you, plus admin fees on top in some cases.
But you can easily get the refund yourself for free by putting in a claim to HMRC yourself.
Using them could leave you out of pocket, AJ Bell head of personal finance Laura Suter said.
"Lots of people who think they are owed a tax rebate would rather get a professional in to handle the reclaim, rather than wading through lots of paperwork and jargon themselves," she said.
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"However, there are lots of rip-off merchants operating in this market, meaning that you could end up getting back very little – or none – of the tax you’re owed, so you need to tread very carefully."
The government is so concerned about rogue firms targeting consumers that it has launched an investigation into how to better protect households.
Here's how to avoid using a tax reclaims firm – and keep ALL of your tax rebate.
How to spot "rip-off" tax reclaim firms
There are a number of ways to spot "rip-off" tax reclaims firms.
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The big red flags you should look out for are sky-high fees.
Any fees you should have to pay using a claims service should be clearly stated on their website.
"You shouldn't have to hand over any of your details in order to find before you can find out what they charge," Laura said.
If the fees are too high, you should be wary about using the service.
"Many agents will say they charge no fee but will instead take half, or more, of the tax you reclaim," Laura said.
"That’s too high and isn’t proportionate to the amount of work they will do."
Look out if a firm asks you for a fee in order for them to transfer the money into you bank account – you shouldn't be charged for this at all, Laura added.
There is a risk that any tax rebate won will be paid directly to the tax reclaims firm you used – and not directly to you.
That means you're relying on the company to pay you what you are owed.
But it could mean that you're left waiting for your money, like reader Deborah Ward.
She is still waiting for her £1,500 PPI tax refund from a tax reclaims company she used – and doesn't know if she'll get the money back.
How to claim tax rebates yourself
Firms that help claim for tax rebates aren't regulated by the Financial Conduct Authority.
That means there is no official system for complaints and you can't go to the Financial Ombudsman Service if things go wrong in the same way you now can for a claims management company.
The best approach to getting a tax rebate is to apply for it yourself – and avoid being left out of pocket.
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Check HMRC's website – you'll be able to see which tax rebates you can apply for yourself without spending a penny.
"Even if you find tax a bit scary and confusing, the Government has made the system much easier to navigate and you usually only need a few bits of information in order to access the system and work out if you’re due a tax rebate," Laura said.
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