Tax rebate

daleos

Advice please ?
A colleague arrived at work and was eager to share news of his recent huge tax rebate (we are PAYE). He was unable or not willing to fully explain how it came about and stated that anyone could do it and he was on a commission from a local accountancy firm of £50 per person that he introduced to them.
Intrigued, a few more of my colleagues pursued it.
They contacted the Accountants who stated that they required all your usual personal details which included your NI number, UTR (unique tax reference number) they stated not to worry if you did not have this as they could get hold of it, (I am guessing, but I think as they now have all your details they pretend to be you when contacting HMRC), your last four years of P60`s and bank details.
The charge for this service was £175 per tax year, therefore, they would take an initial payment of £350 to start the process and a further £350 once the tax rebate had cleared your bank account.
The next thing I know is a number of other colleagues are getting this windfall, therefore, I thought this must be ok and I would do the same.
I then find that once they took the initial payment the accountants do not answer e-mails or text, but on calling them they do not answer but will sometimes text back after the call has rung out. This has set alarm bells ringing with me now and speaking further to my work colleagues it would appear that the whole thing, let`s say, is not legit.
You take receipt of your UTR from HMRC followed by a letter for a small NI payment that HMRC states you owe them (which the accountant says to ignore). I have seen one for just £4 and one for £132, then the tax rebate goes into your account, ranging from £9,000 to £14,000, your tax code changes from 1250 to 2520.
Personally, I have taken advice and instructed them to stop acting on my behalf and am prepared to lose the £350 pound as I smell a rat.

Thank you so much

Dazed_and_confused

Personally, I have taken advice and instructed them to stop acting on my behalf and am prepared to lose the £350 pound as I smell a rat.

Probably a sensible decision.

Your colleagues stand to losecmuch more. It may go something like this.

The accountant files tax return with their authority (doesn't mean your colleagues fully understand what is going on but they give the accountant permission to act on their behalf anyway).

HMRC make large tax refunds based on the information included in the tax returns.

The accountant gets a cut of those tax refunds.

Your colleagues get the remaining balance. Say for example 75% of the refund.

HMRC take a closer look at the tax returns (normally they have a year to do this).

HMRC don't like what they see so ask questions about the returns. There is either no response or no valid explanation for the details in the returns so HMRC finalise their investigation by changing the tax figures so no refund is due. Basically the tax they paid on PAYE is correct.

Your colleagues have to repay the tax originally refunded. Plus interest. Possibly plus penalties.

To put this into context let's say £10,000 is refunded and the accountant keeps £2,500. Leaving your colleague with £7,500.

HMRC then investigate and decide no tax was refundable. HMRC ask for the £10,000 tax refund back. Your colleague pays back the £7,500 they have in their bank account but are £2,500 short. They ask the accountant for their share to pay this. The accountant points to the terms of their engagement letter which clearly states they are entitled to 25% of any tax refund obtained and contains no terms in relation to what should happen if that tax refund subsequently has to be repaid to HMRC.

Your colleague is £2,500 in debt to HMRC.

And as their tax code has been changed they also owe another £2,000-£2,500 in tax for the current tax year as once HMRC complete their investigation it is established that the new new tax code was far too high.

Are you from South Wales by any chance?

daleos

Thanks for the response. As far as I am aware the accountants are not taking 25%, they just take the money I mentioned (£175 per tax year reclaimed). Apparently the tax rebate goes straight into your personal bank account not to the accountant, unless you are suggesting there is a separate payment made to them.
And yes I am from South Wales - How did you guess ?

daleos

Also, there was no engagement letter as far as I know.

Dazed_and_confused

Ok, so they will only have paid the accountant £700 but that still means they could end up £700 out of pocket plus any tax that is owed back for the current tax year.

Unfortunately South Wales seems to have attracted a reputation as a place where people are easily persuaded to make poor financial choices.

Google South Wales steel workers pensions for an example.

It may of course all be totally legitimate however most people on PAYE are not entitled to thousands of pounds in tax refunds for four tax years in a row. And from your original post it doesn't sound like anyone even understands why these refunds are due. At the end of the day there must be a reason for them.

I think you are extremely wise to steer clear.

kuratowski

Check whether they are genuine accountants (i.e. registered with a professional body such as ICAEW or ACCA) and if they are make a complaint. (Based solely on the limited information posted above) they sound like totally unethical individuals who are bringing accountancy into disrepute.

daleos

kuratowski wrote: »

Check whether they are genuine accountants (i.e. registered with a professional body such as ICAEW or ACCA) and if they are make a complaint. (Based solely on the limited information posted above) they sound like totally unethical individuals who are bringing accountancy into disrepute.

Ok will do. Thanks

uknick

daleos, by any chance, have your colleagues drawn down any of their employment pension last year?

daleos

uknick wrote: »

daleos, by any chance, have your colleagues drawn down any of their employment pension last year?

No they have not, can I ask why you are asking ?

daleos

kuratowski wrote: »

Check whether they are genuine accountants (i.e. registered with a professional body such as ICAEW or ACCA) and if they are make a complaint. (Based solely on the limited information posted above) they sound like totally unethical individuals who are bringing accountancy into disrepute.

They are not a member of either body by the looks of it.

kuratowski

Thanks for checking. This is sadly unsurprising given the missing engagement letter, their advice to ignore a letter from HMRC, and their unethical and unprofessional conduct. They are unregulated and quite likely unqualified.