Claims / reliefs: other reliefs: overpayment relief
Paragraph 51 Sch 18 FA 1998 says that a company may make a claim for repayment or discharge of an amount of tax that it believes is not due. Certain conditions must be satisfied before the relief is available and it is not available in respect of a mistake regarding another claim such as capital allowances or group relief.
Overpayment relief claims cannot be included in a company’s CT600 return and Schedule 1A TMA 1970 applies.
If the error relates to timing and there is a related underpayment in another accounting period, the normal restrictions on HMRC discovery assessments do not apply to an assessment to recover the additional tax.
For more information see the Self Assessment Claims Manual at SACM12000 onwards.
Using COTAX to give the relief
Before you enter the relief in RAMA, think about the repayment consequences.
- Use the ‘process a claim’ option in function RAMA (Record / Amend Assessment) to give the relief for the relevant accounting period.
- Enter the amount of the relief in the ‘Non standard red’n’ field that appears immediately before the ‘Net tax payable’ field.
- Enter an appropriate free format message such as ‘Mistake relief under paragraph 51 Finance Act 1998’.
- Complete the function.
Processing the claim for relief normally creates an overpayment on the accounting period record. COTAX handles most overpayments for an AP automatically providing certain conditions exist on the AP. See COM120001 for more information.
However, if there are any underpayments on the company record, COTAX reallocates rather than repaying the overpayment. You should consider the full circumstances of the case and if necessary, write to the company to tell it how the relief will be handled and what repayment (if any) it will receive.