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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: settlement: reallocation of employer overpayments and the P565 process

Since 1 April 2012 the normal time limit for an employer claiming an overpayment of PAYE income tax is four years from the end of the relevant tax period. The time limits for claiming an overpayment of NICs Class 1 and Incentive Payments is six years and Class 1A/B is seven years, as set out in the attached helpcard.

Where, as part of a compliance check, you identify omissions that give rise to liabilities that are recovered by Class 6 Contract Settlement, or Regulation 80 Determinations and / or Section 8 Decisions and you see there is an apparent overpayment on ETMP you should

Once the stencil is received in NIC&EO it will be passed to an authorising officer for them to check and send to DMB to repay or reallocate the overpayment.

If the Assurance team in NIC&EO find any problems with the P565 request they will contact the caseworker directly stating the reasons preventing them from processing the P565 request.

Note: Apparent overpayments on ETMP can arise for a number of reasons, for example

  • missing return or return parts
  • incorrect allocation in ETMP
  • mathematical errors in the return, or

more reasons are outlined in PAYE47060.

It is important when completing a P565 request stencil that you establish the reason for the apparent overpayment and confirm that the overpayment is justified and within the time limits. If this is not done the stencil will be returned to you because the repayment or set off would leave an underpayment on the employer record.

Further guidance relating to the completion of the P565 stencil can be found in the PAYE manual at PAYE47020 and PAYE47045. The link to the P565 stencil in the PAYE manual should not be used. Instead you should use the link at the top of this page which will take you to the Compliance version of the P565 stencil.

If you find there is insufficient space in the stencil to provide the information required in the ‘report of overpayment’ section then you should attach a Word document with the additional information.

When a set off against a charge is required, make a note in the special circumstances box on the P565 of either the date the set off was agreed or the date you are requesting the set off. DMB Banking using this information to calculate the EDP and RPI.

Common reasons for rejection of P565 stencils

  • There is no overpayment on the employer record. If you want to move money on ETMP but there is no overpayment you should send an Eform with full details of the reallocation to:

    • For Shipley PAYE to Banking Employers Unit 1 (Shipley office), in destination office details select workarea ‘Employers’ or
    • For Cumbernauld PAYE to Banking Employers Unit 2 (Cumbernauld office), in destination office details select workarea ‘Employers’.
  • The overpayment shown on the P565 stencil does not match the overpayment on ETMP.
  • The stencil does not provide instructions about how to dispose of the total overpayment on ETMP.
  • There has been activity on ETMP between the completion of the P565 stencil and the point the stencil is actioned and the overpayment is no longer present.
  • The box indicating that the overpayment is a genuine overpayment or an incorrectly allocated payment is not ticked.
  • The Class 1A charge has not been processed (the amount shown as overpaid on ETMP is not a genuine overpayment until the C1A charge is on the record).
  • Reference boxes are not completed or the wrong reference is quoted.
  • The request is to carry an overpayment forward to the current year (CY). This should be notified directly to PT Operations NIC&EO by means of an email via NIC&EO, Emp Office Compliance mailbox (PT Operations NIC&EO).
  • The request is to allocate money from the current year/current tax period to another year/tax period. Current tax periods do not have overpayments until the RTI returns are processed.
  • The overpayment relates to a ‘misallocated’ payment on the employer record, for example the employer did not make the payment. You should send an Eform with full details of the ‘misallocated’ payment to:

    • For Shipley PAYE to Banking Employers Unit 1 (Shipley office), in destination office details select workarea ‘Employers’ or
    • For Cumbernauld PAYE to Banking Employers Unit 2 (Cumbernauld office), in destination office details select workarea ‘Employers’.