HMRC’s new evidence rules will help tackle exploitative refund companies
The Low Incomes Tax Reform Group (LITRG) has welcomed HMRC’s new evidence requirement for claims for tax relief on employment expenses. LITRG hopes that this will make it harder for unscrupulous tax refund companies to take advantage of low-income taxpayers.
Starting from next week (14 October)1 most taxpayers who want to claim tax relief on employment expenses will be required to complete a paper P87 form2 and will need to provide HMRC with evidence that shows they are eligible to claim the relief.3
From this date, it will not be possible to make a claim for employment expenses online or over the telephone. A limited online service will be introduced from 31 October to support taxpayers who want to claim tax relief on flat rate expenses for things like uniforms, other work clothing and tools.4
It is hoped that an expanded online claims process for all other employment expenses will be available from April 2025.
LITRG is using the introduction of this new requirement to remind taxpayers to be careful if they decide to pay a tax refund company to manage these claims on their behalf.5
As LITRG has highlighted in the past, these companies very often charge a percentage of the money they recover as a fee and, in some cases, LITRG has been made aware of some firms who have submitted inaccurate or false claims, leading to problems for taxpayers further down the line if HMRC ask them to repay the whole amount of the incorrect claim – this includes the fee taken by the refund company. It is hoped that HMRC’s new evidence requirements will go some way to stop these unscrupulous companies in their tracks.
Joanne Walker, Technical Officer at LITRG, said:
“HMRC have been concerned about a rise in ineligible claims for tax relief on employment expenses and so this is a welcome step that should make it harder for unscrupulous tax refund companies to game the system and provide some protection for taxpayers.
“It might seem counterintuitive that HMRC are reintroducing a paper process when they want taxpayers to interact with them online, but doing this means that, rather than waiting until their IT systems can catch up, they can get to work to weed out false claims for tax relief and ensure that eligible claims are paid out.
“Some people choose to use a tax refund company to help them claim a refund because they do not understand or have the time to do the paperwork themselves. That is a legitimate choice. There are many reputable companies that can help but sadly, there are some who take advantage of taxpayers.
“Our advice to taxpayers is to think about the risks before using a refund company and to take steps to understand more about how the company operates before asking them to act on their behalf.
“So, if the promise of a tax refund sounds too good to be true, it probably is.”
Notes for editors
- HMRC have produced a briefing that explains more about the new evidence requirements, and this can be found here.
- The paper P87 form can be downloaded from GOV.UK here. This does not apply to taxpayers who normally include their claim for tax relief on employment expenses in a self assessment tax return.
- Taxpayers can check whether they are eligible for tax relief on their employment expenses by using HMRC online tool here.
- For flat rate expenses, specific evidence is not required, though HMRC may still check eligibility before approving a claim.
- We have detailed guidance on our website which sets out things to check if you are considering using a tax refund company. You can find it here.
