Employer returns: employer return - overpayments: introduction
Each employer and contractor must submit an annual return to HMRC. The return is a summary of
- Tax and National Insurance deductions made from employees and subcontractors
- Total payments of tax credits made to certain employees
- Student Loan deductions made from employees who are Student Loan borrowers
- CIS deductions suffered by a limited company
There are different types of returns and some employers may submit more than one return of the same or different type in any tax year. From April 2005 returns for year 2004-05 can be submitted in parts when using online filing or Magnetic Media. If an employer intends to send the whole return by paper, then the return must be submitted as a complete return and not in parts.
From April 2007 contractors have to submit monthly returns direct to CIS. For years 2007-08 onwards contractors are no longer required to submit a CIS36 return.
This section covers overpayments that result from the capture of the return.
The remainder of this subject is presented as follows
Investigation and verification
All overpayments must be investigated to ensure they are correct and all appropriate returns or return parts for the year have been processed. More information is given in ‘Basic principles - reviewing pot overpayments’ at PAYE47015.
When you receive an overpayment notification or a request from an employer / contractor for repayment, consider the information in ‘Overpayment notification’ at PAYE47060 and follow the instructions in the Action Guide at PAYE47061.
Disposal and supervision
Overpayments can be disposed of either
- Automatically by using Functions OVERPAYMENT DISPOSAL and AUTHORISE OVERPAYMENT DISPOSAL
- Manually using form P565
All overpayments must be authorised by the authorising officer (Word 27KB).
Function OVERPAYMENT DISPOSAL introduced from April 2001 allows you to advise Banking Operations how to deal with an overpayment.
Function AUTHORISE OVERPAYMENT DISPOSAL introduced in April 2004 allows staff at officer grade and above, who have responsibility for authorising overpayment disposal, to authorise or reject the transaction.
If an overpayment must be disposed of manually using a form P565 (PDF 26KB), a form P565 Request Stencil (Word 43KB) must be completed by the officer investigating the overpayment and referred to the authorising officer. If the authorising officer is satisfied that the overpayment and the disposal instructions are correct they must authorise the overpayment by completing a form P565.
Overpayments and dissolved limited companies (Bona Vacantia)
A limited company is a legal entity and where a limited company ceases to trade and is ‘dissolved’ on the companies register, its directors and / or shareholders are not entitled to any repayment due to the company. More information is available in ‘Bona Vacantia and dissolved limited companies’ at PAYE47070.
CIS deductions suffered (CIS)
From 6 April 2002, limited companies, that have deductions made from their income as subcontractors, are able to set-off these deductions against their monthly or quarterly PAYE / NIC and any CIS liabilities due from their employees and / or subcontractors.
The amount set-off is returned by completing the CIS deductions suffered box on their annual return form P35.
At the end of the tax year, following receipt of the company’s P35 return and where the company acts as a subcontractor, any excess CIS deductions which cannot be set-off against PAYE tax / NIC may be refunded or set off against other liabilities.
Further information can be found in the CISR Manual.
New time limits came into force on 1 April 2010 although some transitional provisions meant that for some repayments these time limits did not take effect until 1 April 2012. Since 1 April 2012 the normal time limit for an employer claiming an overpayment of PAYE tax is 4 years from the end of the relevant tax period. However, there are different time limits for claiming an overpayment of NICs as set out in the following table.
|Tax Year||Time Limit|
|2007-08||5 April 2012|
|2008-09||5 April 2013|
|2009-10||5 April 2014|
|2010-11||5 April 2015|
Class 1 National Insurance Contributions
|Tax Year||Time Limit|
|2007-08||5 April 2014|
|2008-09||5 April 2015|
|2009-10||5 April 2016|
|2010-11||5 April 2017|
Class 1A and Class 1B National Insurance Contributions - payable in the year after the tax year to which they relate
|Tax Year||Time Limit|
|2007-08||5 April 2015|
|2008-09||5 April 2016|
|2009-10||5 April 2017|
|2010-11||5 April 2018|
- From April 2001 - tax credits were paid to employees by employers (PVE); details were included on the return
- From April 2004 - a ‘Post Capture’ work list was introduced
- From March 2006 - tax credits paid to employees by employers (PVE) ceased and are now paid direct to the recipient
Note: If an employer tells you that they have paid Working Tax Credit after 31 March 2006 and / or has carried forward Tax Credit Funding into 2006-07, you should advise the employer to contact the Employer Helpline on 0300 200 3200 (text phone 0300 200 3212).
Data Protection Act
The provisions of the Data Protection Act 1998 (DPA) apply to employer records in the same way as they apply to taxpayer records on other HMRC computers.
You must only access an employer record if you have a business need to do so.
Bear in mind that an audit trail is created every time you access an employer record. Any unauthorised or inappropriate accesses will be considered for action under the Department’s Conduct and Discipline rules, and may constitute a criminal offence.