Penalties & Compliance
- Last Updated: 23 September 2014
Overpayment Relief replaced the old "Error or Mistake Relief" from 1 April 2010 (companies) and 6 April 2010 (individuals).
- A claim for Overpayment relief may be made in circumstances where the taxpayer has made a mistake in a tax return which has led to more tax being assessed than should be, or when HMRC has made a determination of tax due and the taxpayer believes it to be incorrect.
- Overpayment Relief applies for income tax, capital gains tax and corporation tax.
- Other formal or informal processes for reclaiming overpayments (e.g. carry backs of loss relief etc) have not changed.
- A claim for Overpayment relief may not be made more than 4 years after the end of the relevant tax year.
- This time limit is modified where the claim relates to a mistake in an individual’s 2004-05 or 2005-06 self-assessment return if they were not given a notice to make the return within 12 months of the end of the tax year. The time limits for claims in these cases are 31 January 2011 and 31 January 2012 respectively.
- The general time limits for HMRC assessment and tax repayment claims changed also in 2010.
Form of overpayment relief claims
- Be in writing and made by the person who is due the relief (except for those arising from mistakes in partnership tax returns)
- State that the person is making a claim under Schedule 1AB Taxes Management Act 1970 (Income Tax or Capital Gains Tax) or Paragraph 51 Schedule 18 Finance Act 1998 for Corporation Tax .
- Identify the tax year for which the mistake or excessive assessment has been made
- State the grounds on which the person considers that the overpayment or excessive assessment has occurred
- State the total amount of tax (and Class 4 NICs, if applicable) that has been overpaid, or subject to excessive assessment
- State whether the person has previously made an appeal in connection with the payment or the assessment
- Include a declaration signed by the claimant stating that the particulars given are correct and complete to the best of their knowledge.
If the claim is for repayment of tax, the claimant must include documentary proof of the tax deducted or suffered in some other way
Claims where overpayment relief does not apply
- Late amendments to tax returns will not be processed as overpayment relief claims.
- Overpayment relief is not available in place of other statutory claims that a taxpayer might have made, or might have been able to make.
- This applies whether or not any such claim was made in a return or needed to be made in a return.
- This will typically affect late loss and capital allowance claims: they must be claimed on returns and within the time limits for amending the returns.
Special relief: out of time appeals against determinations and penalties
A special statutory relief exists in cases where it would be unconscionable for HMRC to seek to recover an amount of tax or refuse repayment (if already paid). This relief only applies where HMRC has made a determination of tax due and provided certain defined circumstances are met, see Special Relief.
Practice generally prevailing
Both error or mistake relief and Overpayment Relief have an exception where the tax was calculated in accordance with prevailing practice at the time.
HMRC have considered the comments of the Court of Appeal concerning prevailing practice in the Franked Investment Income Group Litigation (paragraphs 255 to 264).
In the view of the court, the practice generally prevailing exception is to be read as subject to the limitation 'that it applies only if and to the extent that the United Kingdom can consistently with its [EU] treaty obligations impose such a restriction'. The court concluded that practice generally prevailing does not affect a claim for repayment of taxes paid in breach of EU law.
HMRC understand this principle also applies to the new overpayment relief. Therefore, if a claim for error or mistake relief or overpayment relief relates to taxes paid in breach of EU law, HMRC will not seek to disallow it on the basis that the tax liability was calculated in accordance with the prevailing practice.
The other conditions for error or mistake relief and overpayment relief, such as time limits, will still need to be met in all cases.
Small print, links & updated
Further reading: Time limits for assessment and claims