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HMRC internal manual

Self Assessment Manual

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HM Revenue & Customs
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Repayments: issue repayment: nominations and deeds / letters of assignment

General

A Self Assessment return and / or claim form R38 enable a taxpayer to nominate someone else to receive a repayment on their behalf. A taxpayer may also authorise by letter that a repayment is to be issued to a nominee.

Some taxpayers choose to go further than just a nomination and legally ‘assign’ a repayment by deed or letter to a nominee. A deed or letter of assignment assures the nominee that the repayment will definitely be paid to them as opposed to a nomination that can be withdrawn by the taxpayer at any time.

For example, a nominee is frequently the taxpayer’s agent and sometimes agents insist that their client nominate them to receive a particular repayment so they can be sure of getting their fees. But because the taxpayer can withdraw their nomination, some agents are now getting their clients to legally assign a repayment to them to be certain of receiving the repayment.

Sometimes a repayment may be assigned to a loan company that lends money to a taxpayer in anticipation of them receiving a repayment.

If a deed of assignment is received and one is already in place, the original deed must be revoked before the new deed can be accepted.

2008 Finance Act changes

Section 133 of the Act closes off the possibility of separating a person’s right to claim a repayment from their liability to pay their HMRC debts by assigning that right to another person. All assignments received on or after 21 July 2008 are secondary to set-off.

In effect S133 allows HMRC to make set-off of any overpayment to a taxpayer’s outstanding debts in accordance with S130 of the Act (HMRC powers to make set-off), before making payment of any remaining assigned repayment to the assignee. This ensures that an assignee cannot receive any more of a repayment than the original taxpayer would have received had the repayment not been assigned.

Also any outstanding debts owed by the assignee should be taken into account and considered for set-off before any assigned repayment is made to the assignee.

Differences between a nomination and an assignment

A taxpayer may nominate someone else to receive a repayment on their behalf by completing the appropriate authorisation on the return, form or by letter and this is known as a ‘bare’ nomination. In the case of a nomination a taxpayer remains the person legally entitled to the repayment and the repayment is issued to their nominee at our discretion. The taxpayer may also withdraw their nomination at any time prior to the repayment being issued.

The nomination can be withdrawn over the telephone if the repayment is to be issued to the taxpayer(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)

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

If a taxpayer legally assigns a repayment to a third party by a deed or letter, that third party (the assignee) becomes the person (or company) legally entitled to the repayment. The deed or letter of assignment is legally binding and we have no option but to issue the repayment to the person (or company) to whom it has been assigned.

The assignment can only be revoked if both the taxpayer who made the assignment and the person to whom the repayment was assigned both agree to it being revoked. The agreement to revoke the assignment must be in writing and signed by both parties before being sent to HMRC. Note: An Agent cannot revoke an assignment on his client’s behalf. Both parties to the assignment must sign an agreement to revoke the assignment otherwise it must be returned and the appropriate signatures requested.

An assignee may also nominate someone else to receive the repayment on his or her behalf and this nomination must be in writing and signed.

The person who is assigned to receive the repayment is always able to disclaim their right to the repayment but, where the taxpayer wishes to revoke the deed, and a dispute arises between the parties, HMRC cannot get involved.

A valid assignment

An assignment may be made by either a deed or letter and in both cases in order to be valid must meet the following criteria

  • It must be absolute, that is it must transfer the right to the repayment from the taxpayer to the assignee unconditionally
  • It must contain a written signature made by the taxpayer entitled to the repayment (‘wet’, scanned, photocopied and faxed signatures are all acceptable)
  • The actual assignment must be submitted to HMRC (telephone call reporting it’s existence or photocopy will not suffice)

No particular form of words is required for the assignment but it must specify the repayment that is being assigned. For example, ‘The Income Tax repayment of £1,345.75 due to me for the year 2014-15’ or ‘Income Tax and Class 4 NIC overpaid by me for the two years ended 5 April 2015’ are acceptable, but ‘any repayment of tax due to me’ is not.

If you consider that an assignment does not satisfy the above criteria, you should inform the taxpayer of this (or the agent if the assignment was submitted by the agent) using SEES letter OCA197 and explain why the assignment is not valid.

If the taxpayer has already nominated the same assignee in the normal way to receive the repayment, then you should proceed with the issue of the repayment to the nominee.

If you are not sure about the validity of an assignment, you should contact the BusinessUserSupport (SA), PTCPP mailbox for advice.

If a taxpayer has assigned a repayment due to them to a third party, the assignee will usually also be nominated on the return or claim form to receive repayment. Where the assignee is not the same as the nominee shown on the return or claim form or, the nomination section has not been completed, the relevant repayment must be issued to the assignee, as they are legally entitled to it.

What to do when you receive a deed or letter of assignment

It is important that a deed (or letter) of assignment is identified in the receiving office as soon as possible to ensure that the repayment assigned under the deed (or letter) is not issued to the claimant or another nominee in error. There should also be a check to see if a deed of assignment already exists, since if a deed is already in place, it must be revoked before the new deed can be accepted.

If a taxpayer has assigned a repayment to a third party, the assignee will usually also be nominated on the return or claim form to receive repayment. Where the assignee is not the same as the nominee shown on the return or claim form, the nomination is superseded by the assignment and the relevant repayment must be issued to the assignee as they are legally entitled to it. Note: It is important that the guidance at SAM110132 is followed to note receipt of the deed or letter of assignment, and to set the No Repayment signal appropriately.

Bankruptcy cases

Special rules apply to set-offs in bankruptcy cases (S131 FA2008) and mutuality of debt is crucial, but a repayment which has been legally assigned to a third party on or after 21 July 2008 is now secondary to set-off against outstanding HMRC debts. In effect, any repayment that is assigned can first be used for set-off against the taxpayer’s outstanding debts and then against any outstanding debts of the assignee, before any remaining amount is repaid to the assignee.

The taxpayer cannot assign a repayment, which under the Insolvency Act 1986, legally belongs to the trustee in bankruptcy. If you receive a deed or letter of assignment which seeks to assign a repayment which legally belongs to the trustee, do not accept it. Return it to the taxpayer (or agent) and explain why the repayment cannot be assigned.