This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Employment Income Manual

Social security benefits: benefits paid in arrears, overpaid and not paid weekly

Arrears of benefit may be paid in a lump sum. The arrears are chargeable for the year or years of assessment to which they relate.

The normal time limits for making assessments are extended in these circumstances by Section 35 TMA 1970, which allows assessments to be made at any time within six years after the end of the year of assessment in which the arrears were received.

With effect from 1 April 2010 the time limit is 4 years from the end of the year of assessment.

Overpaid benefits

Where benefits have been overpaid the DWP may recover the overpayment by deducting amounts from current benefit payments. Where this happens the full amount of the current benefit, before any deductions to recover previous overpayments, is taxable. EP8387 explains the coding implications.

In any case where benefits have been overpaid in an earlier year the amount of benefit charged to tax for that earlier year should be reduced by the amount overpaid, so that the individual is taxed on what he or she was entitled to, not on what he or she received.

This should be done when the individual makes a claim regardless of the steps taken by the DWP to recover the overpaid benefit. No tax repayment should be made in respect of any year which is out of date for assessment or amendment at the time the claim to repayment is made.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Pension arrears paid following the issue of deficiency notices

Following the issue of deficiency notices by NICO regarding gaps that appear in a person’s National Insurance contributions record, subject to payment of additional voluntary contributions, some pensioners may receive small amounts of pension arrears. The arrears may relate to more than one tax year.

Recipients will be advised by the DWP that they should only enter on the relevant tax return the amount of pension to which they are entitled for that year and not the total amount received (if the amount received includes arrears relating to one or more earlier years).

The guidance above does not apply to these payments.

Payments not made weekly

Claimants can choose to receive some benefits (for example, the State pension) every four or thirteen weeks in arrears, rather than receiving the benefit each week.

Depending on payment dates, an individual who chooses to receive the State pension every 4 weeks in arrears, may receive 14 payments in a year (equivalent to 56 weeks benefit) but for income tax purposes the individual remains taxable to the 52 weeks pension entitlement that arose during the tax year ended on 5 April.

In the following year the individual may receive 12 payments equivalent to only 48 weeks entitlement but the taxable benefit will again be the 52 weeks entitlement.

The correct taxable amount is always the figure of weekly entitlement. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)