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HMRC internal manual

PAYE Manual

HM Revenue & Customs
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Employer returns: employer return - overpayments: disposing of an overpayment

Note: In all cases when dealing with an overpayment notification or repayment claim, follow ‘Overpayment notification (Action Guide)’ at PAYE47060.

If having made all necessary checks you are satisfied that a genuine overpayment exists, you will need to determine which method of overpayment disposal is appropriate.


When dealing with overpayments for the tax years CY-1 to CY-4 inclusive, you must use Function OVERPAYMENT DISPOSAL to advise Banking Operations to dispose of an overpayment where the disposal instruction is either

  • Repayment of the total overpayment to the employer or contractor
  • Reallocation of the total overpayment to the current year 


  • Transfer of an overpayment to the Permanent Overpayment account (POP) where the overpayment does not exceed £10 

Function AUTHORISE OVERPAYMENT DISPOSAL introduced in April 2004 allows staff at officer level and above, who have responsibility for authorising overpayment disposal, to authorise or reject the transaction.

Manual overpayments disposal - form P565

You must dispose of an overpayment manually using a form P565 in the following circumstances

  • To reallocate an overpayment to a tax year other than current year (CY)
  • To reallocate part of an overpayment to CY
  • To treat an overpayment as a Permanent Overpayment where

    • The amount exceeds £10 (this was £100 between April 2003 and September 2003) and repayment, reallocation or transfer has not been requested by the employer or contractor
    • The overpayment has arisen after the Debt Management Office has reconstructed a Pro-Forma return due to wages records being destroyed / lost
    • The officer investigating the overpayment considers that there are other reasons which make repayment, reallocation or transfer inappropriate, at the time or at any time in the future
  • Where an overpayment arises wholly or partially from Construction Industry Scheme (CIS) deductions for example where the CIS deductions recorded on the form P35 exceed the total liabilities due
  • To transfer all or part of an overpayment to other liabilities, for example to reallocate to SA, CT, Reg 80 determinations and so on
  • To repay part of an overpayment to the employer or contractor
  • To repay the total or part of an overpayment to a nominee
  • To repay all or part of an overpayment to an address other than the correspondence address held on the employer record
  • To repay all or part of an overpayment to NICO
  • A combination of reallocation, transfer, or repayment at the same or different times, for example, the employer may request that part of the overpayment is repaid and the balance is held in anticipation of a future liability
  • To reallocate an overpayment to the appropriate Bona Vacantia recipient when a limited company has been dissolved on the Companies Register. More details in ‘Bona Vacantia and dissolved limited companies’ at PAYE47070 
  • The only return received is a Pro-Forma
  • There are unusual circumstances to be brought to the attention of Banking Operations
  • The following indicators are shown on Function VIEW BROCS

    • LAN (working with Debt Management) - Format 5
    • RFI (working with Banking Operations) - Format 5
    • NORPICAL Format 9 (BROCS will only calculate automatically rpi if the RPICAL signal is set)
    • Welsh Language Signal - Format 6
  • Function VIEW BROCS shows any of the following

    • Monies transferred to the Enforcement Office, or to the DSS - Format 3
    • Remissions are present - Format 3
    • There is an insolvent reference present - Format 1
    • No address is available or the case is RLS - Format 1