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HMRC internal manual

Self Assessment Manual

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HM Revenue & Customs
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Repayments: issue repayment: introduction

Repayments - general

A credit balance on a taxpayer’s record will be held until either a charge becomes due or a repayment is requested. Typically where repayment is requested, the taxpayer’s record will contain a credit balance.

Repayments will arise under SA from

  • Requests to repayment made using the SA return
  • Claims made under S59A (3) or (4) TMA to reduce payments on account
  • Payments made in error
  • Permanent cessation cases such as death or emigration
  • S144 TCGA adjustments
  • Other circumstances where, during the year, the taxpayer has a credit balance on the SA record and there are no charges becoming due within the next 45 days

In addition, under SA the following repayment requests will continue to be processed in accordance with existing practices

  • In-year repayment requests for CIS deductions
  • PAYE cessation or unemployment repayment requests (including those made ‘in-year’)
  • Provisional repayments claimed upon leaving the UK

Repayment requests

A repayment will not be made unless the taxpayer or agent makes a specific request and these can now be made in a number of ways

  • On the tax return
  • By written request
  • By telephone (certain restrictions apply)
  • Structured Action Requests (SARs) through SA Online
  • By fax (certain restrictions apply)

A request for repayment made on a tax return is not only relevant to any repayment arising directly from the processing of that return but for any subsequent repayment for that tax year, for example following a return amendment.

Repayment requests by telephone

If a taxpayer telephones to request a repayment and the repayment has not previously been requested, the caller’s identity must be satisfactorily verified before the request can be accepted and the repayment issued. For caller verification guidance, refer to the Helpcard on the Telephone Standards website.

Following verification of the caller’s identity but before the request is accepted and the repayment issued, if any of the following circumstances apply then the taxpayer may still be required to put their request in writing

  • Where the taxpayer requests repayment by BACS, it should be confirmed that the bank account details provided have already been submitted on a SA return. If they have not previously been submitted or are different from those already held, the taxpayer should be asked to put their repayment request and bank details in writing. Alternatively, if the customer is prepared to accept repayment by Payable Order, then the repayment can be made immediately
  • If the taxpayer notifies us of a new address at the same time they are making a telephone request for repayment to be issued by payable order, the taxpayer’s record should be updated with the new address and the date they moved to the new address, but they should be asked to put their repayment request in writing
  • If the taxpayer’s request is that the repayment be issued to a nominee, the taxpayer must put their request in writing. If however the taxpayer has already nominated the nominee to receive the repayment on their latest SA return, but the repayment was inhibited, no further written request is required

An appropriate entry must be made in ‘SA NOTES’ to record that a request for repayment has been made by telephone and accepted.

Structured Action Requests (SARs) through SA Online

Prior to 30 October 2006, when a taxpayer submitted a SAR repayment request through SA Online, the request was passed onto a Contact Centre where a clerical entry was made in ‘SA NOTES’ to record that a repayment request has been received through SA Online and accepted. The Contact Centre would then issue the repayment clerically using SA function ISSUE REPAYMENT FROM OVERPAID BALANCE.

From 30 October 2006 the above process was enhanced and is fully automated. When a taxpayer makes a SAR repayment request through SA Online, SA Notes are automatically updated with the details of the repayment request and the repayment is automatically created for issue.

Automated SAR repayment requests are still subject to the same inhibition rules as automatic repayments generated from returns and where appropriate will be inhibited and populate the ‘Inhibited Repayments’ Work List (W030).

From 4th February 2008 this automated facility to request a repayment through SA Online was extended to accept repayment requests from Trusts and from their agents.

Repayment requests by fax

Where a repayment is requested by fax either from the taxpayer or an authorised agent (64-8 held) it can only be accepted in the following circumstances and if signed by the taxpayer

  • The repayment is to be repaid to the taxpayer by BACS and the bank details provided are different from those shown on the taxpayer’s return
  • The repayment is to be repaid to the taxpayer by payable order and the fax includes a change of address for the taxpayer and the date they moved to the new address
  • The repayment is to be repaid to a nominee (including authorised agent as nominee)
  • The request is in accordance with a repayment request already made on a return but that repayment was inhibited and the details on that request have now changed, that is a different payee, repayment method, BACS details

Where a repayment is requested by fax from either the taxpayer or an authorised agent (64-8 held) it can be accepted without the taxpayer’s signature only in the following circumstances

  • The repayment is to be repaid to the taxpayer by payable order, or by BACS where the bank details are the same as those shown on the return
  • The request is in accordance with a repayment request already made on a return but that repayment was inhibited and the details of the original request have not changed

Money laundering

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Accuracy of the repayment

If following the issue of a repayment the taxpayer seeks confirmation that the repayment is correct, you should ask the taxpayer to provide details, if possible, of the amounts of any payments made by him / her for the year of repayment. This is in order to confirm that all the payments shown on the taxpayer’s statement for the repayment year are correct to that UTR. An incorrect repayment can result from a payment being allocated to the wrong UTR.

If the payment allocation is confirmed as correct, you should check the figures shown on the actual return with those on the return capture screen to ensure no capture errors have occurred.

If it is confirmed that the correct figures have been captured, you should advise the taxpayer that in view of the HMRC regime for SA returns and claims, that is ‘Process Now, Check Later’, all that can be confirmed is that the relevant SA return has been correctly processed. Advise that the accuracy of the entries on the return are not being confirmed and that confirmation of a repayment at this time does not exclude HMRC of the right to enquire into the return at a later date. Also any subsequent enquiry into the return may identify incorrect entries which may lead to additional tax due.

Automatic repayments

Following capture of the SA return most repayments, where there is a request to repayment on the return, will be issued automatically. The automatic issue of a repayment will be prevented where

  • The overpaid amount is less than £10 (excluding repayments donated to charity). (Note: If the taxpayer pursues the request for repayment, no matter how small, SA function ISSUE REPAYMENT FROM OVERPAID BALANCE will be used to repay the credit balance)
  • The repayment is selected for pre issue quality and/or security checks
  • Signals/events are present on the SA record which inhibit automatic issue
  • The repayment arises from a trust or amended paper return

Note: From April 2008, repayments requested as part of an online amendment to a return originally submitted online, will be issued automatically unless any of the above apply.

Non-automatic repayments

When a repayment is requested and cannot be issued automatically, SA function ISSUE REPAYMENT FROM OVERPAID BALANCE will be used to repay all or part of the credit balance direct from the SA system. This function will be used where

  • Repayment is to made from a trust record or arises from an amended paper return
  • Automatic issue is inhibited and following enquiries it is agreed that repayment can proceed. If the ‘No Repayment’ signal is set, consider whether it is now appropriate to unset that signal
  • A repayment is requested which cannot be issued automatically and a credit balance is held on the SA record (and there are no charges becoming due within the next 45 days)
  • Following approval, an SA repayment that has previously been cancelled using function VIEW REPAYMENT is to be re-issued

The facility to repay through OAS will still be available where the issue of a repayment from the SA repayment system is not appropriate.

Welsh language cases

Legislation gives equal status to the Welsh and English languages and so a taxpayer is entitled to request that all correspondence sent to him / her from HMRC, including payable orders and repayment notifications, are issued in the Welsh language.

But the SA system will not automatically produce output in the Welsh language and so special arrangements have to be made for translated copies of output to be issued by the HMRC Welsh Contact Centre. (See subject ‘Records’, ‘Welsh Language - Arrangements Within SA’ (SAM107010).

This also means that where a repayment is requested on a return it cannot be issued automatically on capture of the return or if requested by Structured Action Request (SAR), if the Welsh Language signal is set. In these cases when the return is captured or the SAR is processed, the repayment will be inhibited and a work item will be created on the W030 ‘Inhibited Automatic Repayments’ Work List for clerical action.

The inhibited repayment must then be issued using function ISSUE REPAYMENT FROM OVERPAID BALANCE but this function will not allow the repayment to be issued by any method other than by CHAPS or Local Office Payable Order if the Welsh Language signal is set. If the repayment is requested by BACS, the Welsh language signal must be unset in order for the above function to allow the repayment to be created for issue by this method. When the repayment has been created the signal must be reset.

This repayment procedure also applies to other Welsh language cases where the repayment request is received by letter or telephone. The setting or unsetting of the Welsh Language signal should only be carried out by

HMRC Welsh Contact Centre (WCC)
Ty Moelwyn
Porthmadog
Gwynedd
LL49 9AB

When a Welsh Language repayment is identified, pass the papers using Track and Trace to WCC, marked ‘Priority’. For work list entries, send details using WAM Box 906 (WCC).

Freestanding credits

Freestanding credits can be created either

  • Automatically, for Schedule 1B Carry Back claims made in the 1st version of a Return for 2001-2002 and later years

Or

  • Manually, for all other circumstances, through the use of function CREATE FREESTANDING CREDIT

Automatic freestanding credits

Where an individuals’ 1st version of their return for 2001-2002 or later years includes a Schedule 1B Carry Back claim, the computer system will automatically create freestanding credits in respect of the claim. These will appear on the record the next working day and will be allocated against any appropriate SA charge.

Where a repayment is requested on the return, this will be automatically repaid along with RPS where appropriate, subject to usual automatic repayment rules. Where a repayment is not requested on the return but is requested at a later date, the function ISSUE REPAYMENT FROM OVERPAID BALANCE must be used to issue the repayment and any RPS payable on the automatic freestanding credit will need to be calculated manually.

Note: New or amended Schedule 1B claims included in amended returns for 2001-2002 or later years can only be dealt with clerically.

Manual freestanding credits

SA function CREATE FREESTANDING CREDIT will be used where a credit, including any manually calculated repayment supplement, is to be entered on the SA record for an individual or trust. This function will be used where, for example

  • An in-year repayment is to be made for a CIS deduction
  • Relief is to be given in respect of a stand alone claim, a claim within a return for 2000-2001 or earlier years, or a new / amended claim within an amended return, to carry back of losses or pension contributions
  • A set-off is to be made from a PAYE/CODA overpayment

Following the use of this function a credit will be created on the SA record which will be available for repayment or allocation against an SA charge.

To prevent an automatic repayment and possible over-repayment being made when the return is received the No Repayment signal will automatically be set whenever this function is used.

Repayment authorisation (or cancellation)

All Draft repayments to be issued will be subject to the ‘pre repayment risk criteria’ by the SA system and may be selected for pre issue quality and/or security checks followed by manual authorisation (or cancellation).

Repayments produced using SA function ISSUE REPAYMENT FROM OVERPAID BALANCE with a repayment method of

  • BACS or Payable Order will be subject to the same security checks as those created from a return
  • CHAPS or Local Office Payable Order will be created with a status of Authorised and will be subject to existing clerical and supervisory procedures

Repayments made using OAS will be subject to existing clerical and supervisory procedures at each Banking Operations office.

Notification of a repayment

When a repayment is issued through the SA system a R1000(CS) or R1002 repayment notice (SAM110185), detailing the make up of the repayment, is also issued.

Where the payee is the agent, a copy of the notice will be issued automatically to the taxpayer or capacitor. Where the payee is the taxpayer, capacitor or nominee, the agent will only receive a copy of this notice where the 64-8 signal on the SA record is set to ‘Y’.

Where a repayment is donated to charity, the charity will receive a repayment notification showing the amount donated and whether Gift Aid applies. It will only show the taxpayer’s name and address if the taxpayer has given their permission for this information to be passed on to the charity.

The taxpayer or capacitor and agent (where 64-8 signal set) will also receive a copy of the repayment notification to confirm that the repayment has been donated to charity in accordance with their instructions.

Payable orders returned RLS

From 1 April 2007, any payable order returned to HMRC Finance as undeliverable via the Returned Letter Service (RLS) will be shredded on receipt.

If non-delivery is suspected, or the taxpayer claims non-receipt, you should

  • Contact HMRC Finance to confirm the status of the payable order
  • Cancel the payable order
  • Arrange for fresh issue of the payable order

PAYE/CODA repayment systems

The PAYE/CODA repayment systems will continue to be used where the SA or OAS repayment system is not appropriate. This will occur where, for instance

  • An unemployment repayment is to be made through PAYE

Note: Including ‘in-year’ unemployment repayment requests from taxpayers in SA

  • A PAYE cessation repayment is requested prior to transfer into SA

Note: For taxpayers already in SA, PAYE cessation repayments should be made by the creation of a freestanding credit and repaid through the SA record

  • The set-off of a CIS deduction is to be made against an earlier year’s CODA liability

Note: This will only apply to in-year repayment requests and is not appropriate where an overpayment arises from the SA return

Where repayment or set-off has been made using the PAYE/CODA repayment system you will need to use the following SA functions

  • AMEND TAXPAYER SIGNALS to set the No Repayment signal. (The setting of this signal will prevent an automatic repayment and possible over-repayment being made when the return is received)
  • MAINTAIN SA NOTES to enter a brief note recording the fact that a repayment / set-off has been made