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HMRC internal manual

PAYE Manual

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HM Revenue & Customs
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Employer returns: employer return - overpayments: provisional repayments

Under normal circumstances there should be no unreasonable delay in processing Employer Annual Returns for tax years 2005-06 onwards.

Employers who request a repayment must wait for their Annual Returns to be fully processed on to our systems before they can receive any repayment which may be due to them.

Charge details will be passed from CIS to BROCS early in May and will then be updated daily. If you receive a request for a repayment before the charge details are passed to BROCS inform the employer / contractor that the repayment will be made when all the expected returns have been processed and the actual overpayment established. If the employer states they cannot wait and they will suffer hardship then you can consider a provisional repayment as detailed below.

After the CIS charge details have been passed to BROCS the CIS charge status will be shown in BROCS (Format 9), see PAYE48110.

A repayment for a PSC and XP scheme must wait until all the monthly CIS returns expected have been received and recorded on the CIS system. Repayments must not be made if the CIS Charge Status in BROCS is shown as PROVISIONAL. If the charge status is PROVISIONAL ask the employer / contractor to contact the CIS helpline 0300 200 3210.

Exceptions to this will be

  • Where an employer can prove that they will suffer genuine hardship by waiting for the repayment to be made

Or

  • Where the employer return includes details of CIS deductions in the following circumstances

    • P or PSC schemes where a complete P35 is at RSI1 and the only entry on the P35 is for CIS deductions suffered

For years up to 2007

* PSC schemes where a P35 is at RSI2 or RSI3 and a CIS36 is subsequently received at RSI1

Or

* XP schemes, as no RSI is applied where the only return required is a CIS36

You must not make a provisional repayment as a result of receiving a complaint based on delay unless hardship is a consideration.

Where an employer contacts you to request a repayment before the return is fully processed, you must follow the instructions contained in ‘Provisional repayments (Action Guide’ at PAYE47106.

Requests for in-year repayments from a limited company who act as a subcontractor in the Construction Industry

When a limited company subcontractor contacts you to ask for an in-year provisional ‘hardship’ repayment, you must inform them that repayment of CIS deductions suffered can only be made after the end of the year and when all the returns have been received as outlined in the legal position below. Under no circumstances should the case be referred to Debt Management and Banking.

Regulation 56, SI 2005, No. 2045 states that subcontractors that are limited companies and get paid under deduction within CIS, are entitled to offset these deductions against their own PAYE / NICs liability as an employer and against any CIS deductions they make from payments to their own subcontractors.

Regulation 56(5) states that HMRC shall not repay any sum to the qualifying limited company sub-contractor until

  1. The tax year in which the deduction was made has ended

And

  1. The company has submitted its annual return on form P35

Therefore, all requests by a limited company for repayment before these two events have occurred must be refused.

If the contractor challenges the legal position then the case should be referred to CISAT Technical. Details are given in CISR97030.

Important exception

The circumstances set out above do not apply in those cases where an incorrect deduction has been made from a limited company subcontractor that was entitled to be paid gross at the time the payment under deduction was made. You will find guidance covering the process to be followed in these cases at CISR72090 and CISR72630.