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HMRC internal manual

PAYE Manual

From
HM Revenue & Customs
Updated
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Employer returns: employer return post capture: recovery of excess tax credit funding - up to 2002

Note: This subject provides details of how to deal with tax creditfunding for tax years up to 2001/02.

An employer is able to apply for funding to pay tax credits if they expect the tax creditsthey have been told to pay in a period to exceed the tax, NIC and Student Loan deductionsdue for that same period. Any excess of funding at the end of the tax year usually resultsin an underpayment on the annual return.

If formal recovery proceedings are necessary the Debt Management Office will refer thepart of the underpayment relating to the excess funding only to IMS, whowill then pass it to the Employer Compliance Investigation Team (ECIT) for pursuit.

ECITs will seek to obtain agreement with the employer and

  • Include the underpayment (and any penalty) in a negotiated Class 6 settlement

Or where this is not possible

  • Issue a determination under Regulation 12 of the Tax Credits (PVE) Regulations 1999
  • Notify the relevant Employer unit of the action taken

Either method will require the capture of a Correction return by the Employer unit.This must be dealt with as priority regardless of the year.

If you are contacted by ECIT follow the guidance in Action Guide ‘Recovery Of Excess TaxCredit Funding - Up To 2002’ PAYE46081.