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HMRC internal manual

PAYE Manual

HM Revenue & Customs
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Employer returns: employer return - overpayments: basic principles - reviewing pot overpayments


If an End of Year overpayment has arisen you will need to consider why the overpayment has occurred.

You must be satisfied that the overpayment has not arisen for any of the following reasons

  • Only one return or return part has been captured for the year but there are further returns or return parts due

    • For years up to 2007 PSC scheme types will require both a P35 and CIS36 to be captured. A repayment position could arise if one is captured in isolation
    • Other additional returns are due. For example employers and contractors who submit their returns on both magnetic tape and on a P35 or CIS36
  • The employer has remitted their Class 1A deduction early and no P11D(b) declaration has been captured
  • The Class 1A NIC indicator is set (viewable on VIEW BROCS Format 9) but the Class 1A NIC charge has not been made yet which may affect any potential repayment resulting from the capture of the annual return(s)

If any of these situations appear to have occurred, you will need to keep details of the net overpayment on the Banking Operations record until the position has been clarified with the employer or contractor. This might involve awaiting additional returns from the employer or contractor or preparing a pro forma additional return and then processing this before reviewing the position again.

Reason for overpayment

There are numerous reasons why a net overpayment has arisen. It is essential that you establish the reason for any overpayment, before you take any disposal action. The following are examples of why an overpayment has occurred (this list is not exhaustive)

  • Mathematical errors in one or more of the boxes on the return
  • Credit has not been taken for an overpayment for the previous tax year brought forward
  • The taxpayer is a small employer (0-49 employees) and has submitted their returns using online filing in the previous years and not accounted for the incentives paid
  • Incorrect amounts entered. For example advances, reimbursements
  • A notional overpayment exists
  • A payment for another year has been wrongly credited to the year
  • CIS deductions suffered by a limited company

For further information about reconciling an overpayment, see ‘Overpayment notification (Action Guide)’ at PAYE47061.

Repayment claims

If you are investigating an apparent overpayment and during discussions with the employer or their agent they request that any justified overpayment is repaid, reallocated to another year on PAYE or to another Head of Duty (for example CT, VAT) for the same employer, you can agree this with the employer or their agent then

  • Arrange for disposal of the overpayment in accordance with ‘Disposing of an overpayment’ at PAYE47025 
  • You must use Function EMPLOYER NOTES to record the details of the call including the person who requested the repayment or reallocation
  • You must confirm the arrangement in your letter to the employer

Note: In these circumstances there is no need to ask for a separate written request from the employer.

In all other circumstances such as repayment to a third party or reallocation to another employer, the request must be made in writing by the employer.

Permanent overpayments

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

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