Over the course of the last few weeks we have been contacted by users who have seen adverts such as this one, suggesting that people can claim tax back worth £624. They've asked why untied's COVID section doesn't have the same effect.
We're warning our users that this is wrong. Don't be misled.
- You cannot claim £624 in tax
- The advert leads you to a site that will keep half of what you can claim - and potentially charge you for other things you didn't intend paying for
- At best a typical person will end up with £44.90, at worst you can find that a third party's bank details are the default for future repayments from HMRC and a whole lot more
What's this about, and what are the facts? What's the origin of the £624 figure?
Can I claim expenses from employment?
If you are employed and incur certain additional costs as a result of your employment, then you're entitled to claim them as tax deductible expenses. It includes things like professional subscriptions and the upkeep of specialist clothing and tools ... stuff like washing uniforms if that doesn't get reimbursed by your employer.
Can I claim for working from home? What if I worked from home during COVID?
During COVID, millions of people found ourselves working from home.
If you didn't have your costs fully covered by your employer (whether that's the electricity you used, or your home broadband), then HMRC agreed that they would allow a flat rate of £6 per week, or £312 per year as an expense. Martin Lewis of Money Saving Expert deserves a lot of credit for this and for raising awareness in the mainstream media.
(If you're self-employed, these things would be simply treated as an expense - the adverts are targeting the employed.)
The £312 per year applies to the 2020/21 and 2021/22 tax years - so if you worked from home at times in both tax years, then that's £624.
You may be entitled to claim £624 of expenses. NOT £624 of tax. So if you are a basic rate taxpayer (at 20%), this works out at being worth £124.80. If you're a higher rate taxpayer (40%), it's £249.60. And if you're paying at the additional rate (45%), it's £280.80. In Scotland, with rates slightly higher it peaks at £287.04.
So even though nobody gets £624 of refund, we're still seeing adverts claiming that they will.
Scroll down and you'll see how the expense can be claimed on your tax return, or directly on the HMRC website for free. It's a simple online form. Basically these services take your numbers and fill in a version of that form - we'd be surprised if any review at all takes place.
These services will take half your money
Beware. Having established that the £624 of tax is actually £624 of expenses and worth £124.80 to you as a basic rate taxpayer ... you then need to work out what you'll be paying the site you've just found online.
That works out at 48% PLUS £20 admin fee.
So after deducting this, your £624 is reduced to £44.90.
That's right - instead of getting £624, you may end up with £44.90.
It could be even less if they charge VAT. And the service that's done this for you will be sitting pretty on £79.90 per claim. That's why they can afford to pay for the premium advertising that legitimate agents and businesses cannot.
But there's more - or rather there's less
One of the ways these services work is by setting their bank account to receive your repayment from HMRC. We advise that if you're due any repayment then money from HMRC should always go straight to you. (Though in many cases, small repayments like this would be made by adjusting your tax code.)
There is further risk that the contract you "sign" may also cover other future claims - not just for working from home - in their terms and conditions. So they'll take a share of that too.
And finally, if you try to cancel, they may impose a termination fee.
How can I claim for working from home during COVID without using these services?
You can claim the expense on your tax return (if you're an untied user then all this is in the special COVID section). Or claim for free on the HMRC website here.
Note that the working from home flat rate just applies to the 2020/21 and 2021/22 tax years - there are more conditions to meet going forward such as having no choice but to work from home (flexible working alone is not sufficient as a test).
In general, how do I know if I'm using a genuine HMRC approved service?
This is difficult, and it is unfortunate that HMRC don't help themselves here.
There is no mark or logo that can be used by legitimate software or by agents to indicate that we are officially recognised by HMRC.
For software, we can only say we're "HMRC recognised". We cannot say "our software is HMRC approved".
The process for appointing agents can also be very cumbersome - if someone isn't already registered with HMRC, the main form for doing this needs to be printed out and posted.
We and many others would welcome HMRC being more explicit in distinguishing between different categories of approval, rewarding and recognising those agents and software products that provide valuable services with a mark that can be trusted by taxpayers.
If you've been affected by one of these services, then there is support out there. Let us know and we'll put you in touch.