SCOTS are losing out on hundreds of pounds after being enticed into using third-party companies to claim tax rebates instead of going directly to the taxman, a new study has found.

A new survey has found that one in five (22%) Scots had been contact by a tax refund company, heard of one by word of mouth or come across a tax refund company online.

A total of 208 firms with ‘tax reclaim’, ‘tax refund’, ‘tax claim’ and ‘tax rebate’ in their names were found in Companies House. And the term ‘tax rebate’ gets 40,500 Google searches a month, despite tax rebates being free to claim via HMRC.

Tax refund companies typically take cuts of 25 per cent to 48 per cent.

Which? found that when additional service costs are added, customers are sometimes left with less money than the firm which processed their rebate.

And an examination of 14 companies by the consumer organisation that either showed up in the results or were flagged by a consumer who had a negative experience found that four out had no mention of the fees they charge on their main website page or in their FAQs section, but the term ‘no win, no fee’ was used in some cases.

It also found that some third-party firms using similar branding and language that consumers would usually expect from HMRC.

One letter sent to a taxpayer and their partner used HMRC’s recognisable teal colour, as well as similar fonts and phrases, which could lead the recipients to conclude they were contacted by the government department itself.

Which found that services offering help with claiming Marriage Allowance are particularly common.

This tax break lets one partner transfer 10 per cent of their tax-free personal allowance to their spouse, providing their spouse earns less than the current personal allowance. It can reduce the couple’s tax bill by up to £252 a year, while a backdated claim can be made for up to £1,220.

According to the Consumer Rights Act 2015, customers must be charged a ‘reasonable amount’ for a service.

However Which found that for a fully backdated Marriage Allowance claim worth £1,220, some tax refund companies charge nearly half in commission.

One company took £585.60 on a service fee of 48 per cent and Which experts believe it is questionable whether this constitutes a reasonable amount.

Which found that customers are usually asked to sign legally binding contracts called a ‘deed of assignment’ giving the tax refund company permission to make a rebate claim on their behalf.

Alarmingly, depending on the terms, this could stay in place beyond the initial claim, allowing the company to take a share of tax rebates the customer is owed into the future, regardless of whether the collector does further work for them.

The consumer organisation said: "There is little recourse for customers unhappy with a tax refund firm. These companies are not regulated so are not subject to the same rules as claims-management companies (CMCs). They do not need to be registered with the Financial Conduct Authority and consumers can not take complaints to the Financial Ombudsman Service (FOS)."

It advised consumers to always try claiming a tax rebate by going directly to HMRC in the first instance as the process for making a claim online is relatively straightforward and the applicant will get 100 per cent of their money.

It said people should always be wary of third-party firms that may appear prominently in online search results, no matter how legitimate they may seem.

Jenny Ross, Which money editor said: “Our research shows that huge numbers of people are coming into contact with firms seeking to entice them into handing over potentially hundreds of pounds of their tax rebate in unnecessary and hard to justify fees.

“For most people with a rebate to claim, HMRC is the best port of call. Go to its website directly to ensure you aren’t left footing any unnecessary bills.”