Inmates of a Scottish prison are scooping tax refund windfalls of up to £800, thanks to the work of a new social enterprise.

Former servicemen, construction workers and those who were self-employed before falling foul of the law are among those benefitting from the scheme.

Privately run HMP Addiewell, in West Lothian, is supporting a social enterprise which provides prisoners with tax advice in the belief that it can support relatives on the outside, or help with the rehabilitation of men at the end of their sentences.

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Kent-based Rift group provides tax advice and guidance to self-employed people but also runs a not-for-profit branch providing help to prisoners, who can end up with more than merely a criminal record when they re-emerge from behind bars.

Rift Social Enterprise launched a not-for-profit scheme in January 2018 to address the problem of prisoners running up huge tax bills while they are in jail, and to encourage more to become self employed.

But some who were previously in paid employment may also be entitled to a tax rebate while they serve their sentence.

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Rift’s chief executive Andy Gullick said tax overpayment was only one issue for prisoners, as some who were previously self-employed do not realise they still need to make tax returns while behind bars or face financial penalties.

This can mean they emerge with huge debts to Her Majesty’s Revenue and Customs (HMRC).

The average prisoner advised by Rift has run up £2800 in tax-related charges – which Mr Gullick says can only increase the chances of them re-offending.

At present, the firm is only contracted to help prisoners at the West Lothian prison to claim tax rebates, with HMP Addiewell taking 25 per cent of any sum reclaimed.

This money in turn is used to help subsidise the cost of Rift helping more prisoners. Anyone who was previously self-employed and paying tax on earnings of £12,000 or more could be eligible to claim, and Rift has achieved an average rebate of £670 for Scottish prisoners who successfully claim.

Mr Gullick said: “Most prisoners – and prisoner governors too – don’t realise this is an issue until we raise it.

“Some people who go to prison are entitled to tax refunds if they are on PAYE. We can help them claim that back. Meanwhile, self-assessment tax returns are all done online. When guys go into prison they can’t usually use a computer to complete it and it may not be a priority anyway.

“HMRC don’t know they’re in prison and they will rack up late charge penalties. Some have thousands of pounds of penalties accruing.

“Then we send them off with a £46 discharge grant and say, ‘On your way, and don’t commit any more offences’.”

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Those who get a tax rebate can spend it in the prison canteen, send a windfall to family outside or set the money aside for a resettlement fund to use when they are released.

The scheme is already operating in several English jails which are run, like HMP Addiewell, by private firm Sodexo, including HMP Peterborough, and a number of other non-Sodexo prisons.

Mr Gullick says they are filling an important gap. “Self-employment wasn’t mentioned once in the UK Government’s education and employment strategy for prisons last year,” he said. “But the sense from the Cabinet Office now is, ‘We’ve missed a trick, here’.”

Rift has approached the Scottish Prison Service. It is in talks on offering services at Edinburgh’s HMP Saughton and hopes other prison governors will consider engaging Rift’s services.

Mr Gullick added: “Prisoners with big tax bills can have an attachment of earnings when they come out with a percentage of any income going towards paying off debts. It is a terrible way to be rehabilitated.

“But, if we can help keep two thirds of those men out of prison for a year, that alone saves the taxpayer a fortune.”

Meanwhile, Mr Gullick rejects criticism of helping offenders claim what they are due. “This is their money, it is not the tax payers’ [money]” he said. “Prison is a punishment in itself and while they are there we need to try to rehabilitate them.”

This view is echoed by Sodexo. Emma Stuart, deputy director of HMP Addiewell, said: “Where tax on a resident’s legitimate income has been overpaid that is rightfully theirs.

“If someone is going to lose their liberty for any period of time the best and most useful outcome is what we do around rehabilitation so the person comes back into the community and doesn’t return to crime or creating any further victims. There’s a very clear value to this work.”

Some “residents” have military backgrounds, she said. “Young people leaving the military can face a range of problems resettling and sometimes, for a small proportion, that can lead them into crime.

“That doesn’t take way from the fact they have served the military and paid tax while they do so.”