Tax refund companies, which HMRC calls repayment agents, make claims for overpaid income tax on your behalf, usually in return for a share of the refund. Since 15 March 2023 an assignment of an income tax repayment to an agent is void, so the only way for the money to go to the agent is a nomination you can cancel at any time before HMRC pays. Agents receiving refunds on paper claims must now be registered with HMRC and use electronic signatures, and you stay responsible for what is claimed in your name.

How do tax refund companies make their money?

A refund company collects the same information you would need to claim yourself, sends the claim to HMRC, and arranges for the refund to be paid to it so it can deduct its fee before passing on the rest. HMRC has said that agents always charge for the service, in some cases up to 50% of the value of the claim. In 2023 it reported that more than 800,000 people claimed refunds for work expenses in the 2021 to 2022 tax year, with an average claim of £125, and that over 70% of them did not receive the full amount because they used an agent rather than claiming directly. Claiming through GOV.UK is free and pays 100% of the refund.

This page looks at refund companies from the taxpayer’s side. For how an accountancy practice should handle a client’s nomination, see nominating tax repayments to an agent.

What kinds of refund do they claim?

Most of the market is in three areas, which match the paper forms covered by HMRC’s rules for fee charging agents:

  • Employment expenses on form P87, such as uniform, tools, professional subscriptions, mileage and working from home. Employees can claim through PAYE if the amount is up to £2,500.
  • Form R40, often for tax deducted from payment protection insurance interest.
  • Marriage Allowance transfer claims.

HMRC has tightened evidence rules in these areas. Since 14 October 2024 it has required evidence of eligibility before processing PAYE employment expense claims, such as receipts, a mileage log with postcodes and reasons for each journey, or a contract showing you must work from home. Flat rate expenses for uniform, work clothing and tools need no evidence, but HMRC says claimants are still responsible for being eligible. Since December 2023 the R40 has required evidence of a PPI claim.

What changed when assignments were abolished?

Many repayment agents used to ask clients to sign a deed of assignment. That transferred the legal right to the refund, so HMRC had to pay the agent, and the client could not cancel it alone. HMRC’s policy paper said these arrangements had been exploitative and could also let agents benefit from other repayments their clients did not know about.

Legislation now makes any assignment of an income tax repayment void where HMRC receives notice of it on or after 15 March 2023. The refund stays the taxpayer’s property. Assignments notified before that date remain binding. In their place, a taxpayer can nominate someone to receive the repayment. HMRC’s Self Assessment Manual at SAM110130 explains that the taxpayer remains legally entitled, HMRC pays a nominee at its discretion, and the nomination can be withdrawn at any time before the repayment is issued, including by telephone if the money is to go to the taxpayer instead.

What rules must a repayment agent now follow?

An agent that charges fees and is nominated to receive a refund on a P87, R40 or Marriage Allowance print and post form must:

  • have an HMRC agent services account and put its agent reference number, name and address in the nomination section;
  • obtain your authority through an advanced electronic signature that is uniquely linked to you and shows if anything is altered afterwards;
  • send the nomination within 6 months of your signature, or the claim will not be processed.

A handwritten signature is accepted only if HMRC has decided that you are digitally excluded before you sign, and you must contact the Income Tax helpline to arrange that yourself; the agent cannot do it for you.

Wider rules now apply as well. Section 223 of the Finance Act 2026 stops a tax adviser from interacting with HMRC about a client’s affairs unless registered, and HMRC’s guidance treats anyone paid to deal with HMRC on someone else’s tax as a tax adviser, including when sending claims; see mandatory registration of tax advisers. The HMRC Standard for Agents expects agents to explain how the refund will reach you, what will be deducted, that nominations can be withdrawn before payment, and to offer a reasonable cancellation period. Agents must never ask for your HMRC sign in details, and their advertising must be fair, clear and not misleading.

What are the risks of using a refund company?

  • You are responsible for the claim. HMRC reminds taxpayers that they, not the agent, are ultimately responsible for their own tax affairs. If an agent claims expenses you were not entitled to, the claim is still yours. HMRC’s evidence checks and its compliance projects on employment expenses are aimed at ineligible claims, and errors in tax returns can bring penalties.
  • The fee can be large compared with the work, particularly for flat rate expense claims you could make online in minutes.
  • Sign up pages may not look like contracts. HMRC has warned that some agents make their sign up pages look like requests for more information.
  • Refunds can be set against debts. HMRC sets any repayment against tax you owe before paying the balance, whoever is nominated.
  • Firms can fail or be shut down. In 2023 HMRC stopped one repayment agent trading after serious anti money laundering breaches; around 11,000 of its clients then received their refunds directly from HMRC. Further action against dishonest firms is covered in HMRC’s approach to dishonest tax agents.

How do you cancel a nomination or claim yourself?

If you no longer want the agent to receive the money, contact HMRC before the repayment is issued; SAM110130 confirms this can be done by phone where the refund is to come to you. Any fee dispute is then a matter of your contract with the agent, so read its cancellation terms. If you can show an agent made an invalid claim on your behalf, HMRC asks you to contact it.

To claim directly, HMRC’s online tool explains the route for each type of refund, from job expenses to tax on savings interest. A refund shown on a P800 calculation can be claimed online with the P800 reference and your National Insurance number. Section 43 of the Taxes Management Act 1970 sets a general time limit of 4 years after the end of the tax year to which the claim relates. Timescales and repayment interest are covered in HMRC repayments and repayment interest.

What does the fee look like in practice?

Illustration only. A care worker is entitled to £240 of relief across four years of uniform expenses. A refund company charging 30% of the refund would keep £72 and pass on £168. Claiming the same flat rate expenses online, with no evidence required, would return the full £240. If the company had also added a mileage claim she could not support, that claim would still be hers to answer for.

What should you check before signing up?

  • The fee as a percentage and in pounds, and whether any minimum applies.
  • Whether you are signing a nomination and how to withdraw it.
  • That the firm is registered with HMRC and quotes an agent reference number.
  • What the agent will claim, and that you can evidence every item.
  • The cancellation period and how to use it.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.